EXHIBIT 10
AGREEMENT FOR THE PURCHASE AND SALE OF STOCK
by and among
Aqua Clara Bottling & Distribution, Inc.,
a Colorado corporation;
BEVsystems International, Ltd.,
a Bermuda corporation;
and those persons specified on
Pages 45 through 51, inclusive, of this Agreement
(begin boldface)
THIS AGREEMENT FOR THE PURCHASE AND SALE OF STOCK ("Agreement") is entered into
effective the 15th day of January, 2002 ("Effective Date"), by and among Aqua
Clara Bottling & Distribution, Inc., a Colorado corporation ("Company"), and
BEVsystems International, Ltd., a Bermuda corporation ("BEVsystems"); and those
persons specified on Pages 46 through 51, inclusive, of this Agreement,
(together, the "Sellers") each a shareholder of BEVsystems, and provides for a
process pursuant to which BEVsystems will become a wholly owned subsidiary of
the Company.
(end boldface)
RECITALS
A. The Company is a reporting issuer pursuant to the Securities Exchange
Act of 1934 ("Exchange Act") and participates on the Over-The-Counter
Bulletin Board electronic quotation service ("Bulletin Board"). The
Company has one wholly owned subsidiary, which is Pocotopaug
Investments, Inc., a Florida corporation.
B. BEVsystems is a privately held corporation.
C. The Company desires to acquire, on the terms and subject to the
conditions and in the manner specified in this Agreement, all of the
issued and outstanding shares of common stock of BEVsystems.
D. BEVsystems believes that it is desirable and in the best interests of
BEVsystems that it be acquired by the Company as a wholly owned
subsidiary of the Company, and BEVsystems desires that the acquisition
proposal of the Company be made available to the shareholders of
BEVsystems.
E. The Company is not prepared or willing to proceed with the transaction
contemplated by the provisions of this Agreement without the support,
agreements, warranties and representations of BEVsystems and the
Sellers specified in this Agreement, and the Company is proceeding in
reliance upon such support, agreements, representations and
warranties.
(begin boldface)
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL BE
DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
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LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
(end boldface)
ARTICLE I
DEFINITIONS
As used in this Agreement, in addition to terms defined elsewhere in this
Agreement, the terms specified below in this Article I shall have the
definitions and meanings specified immediately after those terms, unless a
different and common meaning of the term is clearly indicated by the context,
and variants and derivatives of the following terms shall have correlative
meanings. To the extent that certain of the definitions and meanings specified
below suggest, indicate, or express agreements between or among parties to this
Agreement, or specify representations or warranties or covenants of a party, the
parties to this Agreement agree to the same, by execution of this Agreement. The
parties to this Agreement agree that agreements, representations, warranties,
and covenants expressed in any part or provision of this Agreement shall, for
all purposes of this Agreement, be treated in the same manner as other such
agreements, representations, warranties, and covenants specified elsewhere in
this Agreement, and the article or section of this Agreement within which such
an agreement, representation, warranty, or covenant is specified shall have no
separate meaning or effect on the same.
1.1 Accumulated Funding Deficiency. An "accumulated funding deficiency" as
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defined by the provisions of Section 302(a)(2) of ERISA or the last two
sentences of Section 412(a)(2) of the Code, or, in either case, successor
provisions to such provisions adopted by amendments to ERISA or the Code, as the
case may be, and including, in each case, other provisions of ERISA, the Code or
other law, and regulations adopted pursuant to ERISA or the Code or such other
law, modifying, amending, interpreting or otherwise affecting the application of
such provisions, either in general or as applied to the nature or circumstances
of a particular person that is a party to, or is affected by, or is involved in,
the Transaction and with respect to which person the use of the term in this
Agreement, or in the particular provision of this Agreement, is relevant.
1.2 Affiliate. When used with respect to a person, an "affiliate" of that person
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is a person Controlling, Controlled by, or under common Control with that
person.
1.3 Agreement. This Agreement For The Purchase and Sale of Stock, including all
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of its schedules and exhibits, if any, and all other documents specifically
referred to in this Agreement that have been or are to be delivered by a party
to this Agreement to another such party in connection with the Transaction or
this Agreement, and including all duly adopted amendments, modifications, and
supplements to or of this Agreement and such schedules, exhibits, and other
documents.
1.4 Audited Financial Statements. The balance sheet, income statement, statement
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of stockholders' equity, and statement of cash flows or, in each instance,
equivalent statements of the Company, the Company's subsidiary, or BEVsystems,
as the case may be, as commonly provided to shareholders, as of December 31,
2000, and for the two (2) years then ended, as reported on by the Auditors.
1.5 Auditors. Independent certified public accountants currently being retained
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by the Company or by BEVsystems, as the case may be, for the purpose of auditing
financial statements of the Company or BEVsystems, as the case may be.
1.6 BEVsystems. BEVsystems International Ltd., a Bermuda corporation.
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1.7 BEVsystems Balance Sheet. The most recent balance sheet included in the
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Audited Financial Statements of BEVsystems.
1.8 BEVsystems Disclosure Document. The document delivered by BEVsystems to the
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Company specifying certain disclosures regarding BEVsystems regarding the
Transaction.
1.9 Business Day. Any day that is not a Saturday, Sunday, or a day on which
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banks in Denver, Colorado are authorized to close.
1.10 Closing. The completion of the Transaction, to occur as contemplated by the
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provisions of Article II of this Agreement.
1.11 Closing Date. The date on which the Closing actually occurs, which shall be
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February 25, 2002, unless otherwise agreed by the parties to this Agreement, but
shall not in any event be prior to satisfaction or waiver of the conditions to
Closing specified by the provisions of Article VII of this Agreement.
1.12 Closing Time. The time at which the Closing actually occurs. All events
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that are to occur at the Closing Time shall, for all purposes, be deemed to
occur simultaneously, except to the extent, if at all, that a specific order of
occurrence is otherwise specified.
1.13 Code. The Internal Revenue Code of 1986, as amended and in effect at the
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Effective Date.
1.14 Company. Aqua Clara Bottling & Distribution, Inc., a Colorado corporation.
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1.15 Company Balance Sheet. The most recent balance sheet included in the
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Audited Financial Statements of the Company.
1.16 Company Disclosure Document. The document delivered by the Company to
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BEVsystems specifying certain disclosures regarding the Company regarding the
Transaction.
1.17 Complete Withdrawal. A "complete withdrawal" from a Multiemployer Plan as
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defined by the provisions of Section 4203 of ERISA or successor provisions to
such provision adopted by amendments to ERISA and including other provisions of
ERISA or of other law and regulations adopted pursuant to ERISA or such other
law, modifying, amending, interpreting or otherwise affecting the application of
such provision, either in general or as applied to the nature or circumstances
of a particular person that is a party to, or is affected by, or is involved in,
the Transaction and with respect to which person the use of the term in this
Agreement, or in the particular provision of this Agreement, is relevant.
1.18 "Control". Generally, the power to direct the management or affairs of a
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person.
1.19 Consideration. Shares of the Company's' common stock, which shares may be
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referred to in this Agreement as the "Subject Shares".
1.20 Effective Date. The date which is specified in the preamble of this
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Agreement.
1.21 ERISA. The Employee Retirement Income Security Act of 1974, as amended and
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in effect at the Effective Date.
1.22 Exchange Act. The Securities Exchange Act of 1934, as amended to the date
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as which any reference thereto is relevant pursuant to this Agreement, including
any substitute or replacement statue adopted in place or lieu thereof.
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1.23 Facilities. All warehouses, stores, plants, production facilities,
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manufacturing facilities, equipment, processing facilities, fixtures, and
improvements owned or leased by any party or otherwise used by such party in
connection with the operation of its business or leased or subleased by such
party to other persons.
1.24 GAAP. Generally accepted accounting principles, as in effect on the date of
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any statement, report or determination that purports to be, or is required to
be, prepared or made in accordance with GAAP. All references in this Agreement
to financial statements prepared in accordance with GAAP shall be defined and
mean in accordance with GAAP consistently applied throughout the periods to
which reference is made.
1.25 HSR. The Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended.
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1.26 Inventories. The stock of raw materials, work-in-process and finished
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goods, including, but not limited to, finished goods purchased for resale, held
for manufacturing, assembly, processing, repairing, finishing, sale, or resale
to others, from time to time in the ordinary course of the business in the form
in which such inventories then are held or after manufacturing, assembling,
finishing, processing, incorporating with other goods or items, refining,
repairing, or similar processes.
1.27 IRS. The Internal Revenue Service.
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1.28 Liabilities. At any point in time ("Determination Time"), the obligations
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of a person, whether known or unknown, contingent or absolute, recorded on such
person's books or not, arising or resulting in any way from facts, events,
agreements, obligations or occurrences that existed or transpired at a prior
point in time, or resulted from the passage of time to the Determination Time,
but not including obligations accruing or payable after the Determination Time
to the extent (but only to the extent) that such obligations (i) result from
previously existing agreements for services, benefits, or other considerations,
and (ii) accrue or become payable with respect to services, benefits, or other
considerations received by the person after the Determination Time.
1.29 Multiemployer Plan. A "multiemployer plan," as defined by the provisions of
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Section 3(37) of ERISA or Section 414(f) of the Code, or, in either case,
successor provisions to such provisions adopted by amendments to ERISA or the
Code, as the case may be, and including, in each case, other provisions of
ERISA, the Code or other law, and regulations adopted pursuant to ERISA or the
Code or such other law, modifying, amending, interpreting, or otherwise
affecting the application of such provisions, either in general or as applied to
the nature or circumstances of a particular person that is a party to, or is
affected by, or is involved in, the Transaction and with respect to which person
the use of the term in this Agreement, or in the particular provision of this
Agreement, is relevant.
1.30 Partial Withdrawal. A "partial withdrawal" from a Multiemployer Plan, as
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defined in Section 4205 of ERISA or successor provisions to such provision
adopted by amendments to ERISA and including other provisions of ERISA or of
other law, and regulations adopted pursuant to ERISA or such other law,
modifying, amending, interpreting or otherwise affecting the application of such
provision, either in general or as applied to the nature or circumstances of a
particular person that is a party to, or is affected by, or is involved in, the
Transaction and with respect to which person the use of the term in this
Agreement, or in the particular provision of this Agreement, is relevant.
1.31 Payables. Liabilities of a party resulting from the borrowing of money or
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the incurring of obligations for merchandise or goods purchased.
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1.32 Plan Termination. A termination of a Pension Plan, whether partial or
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complete, within the meaning of Title IV of ERISA.
1.33 PBGC. The Pension Benefit Guaranty Corporation.
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1.34 Pension Plan. A "pension plan" or "employee pension benefit plan," as
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defined in Section 3(2) of ERISA or successor provisions to such provision
adopted by amendments to ERISA and including other provisions of ERISA or of
other law, and regulations adopted pursuant to ERISA or such other law,
modifying, amending, interpreting, or otherwise affecting the application of
such provision, either in general or as applied to the nature or circumstances
of a particular person that is a party to, or is affected by, or is involved in,
the Transaction and with respect to which person the use of the term in this
Agreement, or in the particular provision of this Agreement, is relevant.
1.35 Prohibited Transaction. A "prohibited transaction," as defined in Section
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406 of ERISA or Section 4975(c) of the Code, or, in either case, successor
provisions to such provisions adopted by amendments to ERISA or the Code, as the
case may be, and including, in each case, other provisions of ERISA, of the Code
or of other law, and regulations adopted pursuant to ERISA or the Code or such
other law, modifying, amending, interpreting, or otherwise affecting the
application of such provisions, either in general or as applied to the nature or
circumstances of a particular person that is a party to, or is affected by, or
is involved in, the Transaction and with respect to which person the use of the
term in this Agreement, or in the particular provision of this Agreement, is
relevant.
1.36 Projections. The projections of economic results of BEVsystems, prepared
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quarterly through December 31, 2001, and delivered to the Company pursuant to
the terms of this Agreement. The Projections include projected financial results
for the business operations of BEVsystems. The Company acknowledges that
projections of future economic performance are necessarily unreliable and
subject to the occurrence or nonoccurrence of a variety of events, but
BEVsystems represents and warrants that the Projections have been prepared on
the basis of assumptions that are, in the judgment of BEVsystems, reasonable in
all respects and are not to the knowledge of BEVsystems contrary in any material
respect to fact or to events that have occurred or are presently in existence.
1.37 Proprietary Rights. Trade secrets, copyrights, patents, trademarks, service
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marks, customer lists, and all similar types of intangible property developed,
created or owned by the person claiming ownership, proprietary or similar, or
used by such person in connection with such person's business, whether or not
the same are entitled to legal protection.
1.38 Proxy Statement. The document prepared by the Company for submission to its
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shareholders soliciting their proxies to permit the persons to whom proxies are
thereby granted to vote to approve or disapprove the Reverse Stock Split and the
change of the Company's name to Bevsystems International Inc.
1.39 Receivables. Accounts receivable, notes receivable, and other obligations
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appearing as assets on the books of the Company or of BEVsystems, respectively,
and customarily specified as assets in balance sheets prepared in accordance
with GAAP.
1.40 Registration. Registration pursuant to the Securities Act.
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1.41 Reportable Event. A "reportable event," as defined in Section 4043(b) of
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ERISA or successor provisions to such provision adopted by amendments to ERISA
and including other provisions of ERISA or of other law, and regulations adopted
pursuant to ERISA or such other law, modifying, amending, interpreting, or
otherwise affecting the application of such provision, either in general or as
applied to the nature or circumstances of a particular person that is a party
5
to, or is affected by, or is involved in, the Transaction and with respect to
which person the use of the term in this Agreement, or in the particular
provision of this Agreement, is relevant.
1.42 Reverse Stock Split. The completion by the Company of a 1 for 10 reverse
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split of those shares of the Company's' common stock issued and outstanding on
the Effective Date, which shall be, and hereby is, a condition precedent to the
closing and consummation of the Transaction.
1.43 SEC. The Securities and Exchange Commission.
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1.44 Securities Act. The Securities Act of 1933, as amended to the date as of
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which any reference thereto is relevant pursuant to this Agreement, including
any substitute or replacement statute adopted in place or lieu thereof.
1.45 Sellers. Those persons specified on Pages 48 through 53, inclusive, of this
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Agreement.
1.46 Transaction. The acquisition by the Company of all of the issued and
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outstanding common stock of BEVsystems and the related transactions contemplated
by this Agreement.
1.46 Unaudited Financial Statements. The balance sheet, income statement,
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statement of stockholders' equity and statement of cash flows or equivalent
statements of the Company, the Company's subsidiary, or BEVsystems, as the case
may be, as commonly prepared, as at September 30, 2001, with comparable
statements for each similar period of the prior fiscal year.
1.48 Welfare Plan. A "welfare plan" or an "employee welfare benefit plan"
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defined in Section 3(1) of ERISA or successor provisions to such provision
adopted by amendments to ERISA and including other provisions of ERISA or of
other law, and regulations adopted pursuant to ERISA or such other law,
modifying, amending, interpreting, or otherwise affecting the application of
such provision, either in general or as applied to the nature or circumstances
of a particular person that is a party to, or is affected by, or is involved in,
the Transaction and with respect to which person the use of the term in this
Agreement, or in the particular provision of this Agreement, is relevant.
ARTICLE II
THE TRANSACTION
2.1 The Transaction. On the Closing Date, and at the Closing Time, subject in
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all instances to each of the terms, conditions, provisions and limitations
specified in this Agreement, (i) the Sellers shall surrender and tender their
shares of capital stock issued by BEVsystems to the Company and, as
consideration and in exchange for those shares, subject to the provisions of
Section 6.15 of this Agreement, the Company shall issue to the Sellers
30,432,410 shares of the Company's common stock; (ii) the officers of the
Company immediately prior to the Closing Date, except E. Douglas Cifers
("Cifers"), will resign their offices with the Company; (iii) the directors of
the Company immediately prior to Closing Date, except Cifers, will resign as
directors of the Company; and (iv) the name of the Company shall thereafter be
changed to the name BEVsystems International Inc., as soon as practicable after
------------------------------
the Closing.
2.2 Delivery of Consideration. Pursuant to the Transaction, each Seller shall be
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entitled to receive, from and after the Closing, in respect of the shares of
common stock of BEVsystems issued and outstanding immediately prior to the
Closing Date owned by such Seller (and upon surrender of the certificate(s)
evidencing and representing those shares, duly endorsed and in all respects in
proper form for transfer), such Seller's pro rata share of the Consideration.
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2.3 Closing. The Closing of the Transaction shall take place at the offices of
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Stepp Law Group, 1301 Dove Street, Suite 460, Newport Beach, California, at
10:00 A.M. on the Closing Date, or at such other place and time as BEVsystems,
the Sellers and the Company may agree upon, which other date shall then be the
Closing Date.
2.4 Parties to the Agreement and Transaction. By executing this Agreement, each
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of the Sellers agrees to be obligated by the provisions of this Agreement and by
any amendment, modification, or change in or to this Agreement or any of its
provisions that is accepted by Sellers holding a majority of all of the issued
and outstanding shares of common stock of BEVsystems held by all of the Sellers
in the aggregate; provided, however, that no such amendment, modification, or
change shall treat any Seller who does not consent thereto more favorably than
such amendment, modification, or change treats any Seller who does consent
thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BEVSYSTEMS
BEVsystems hereby represents and warrants to the Company the following:
3.1 Organization And Qualification. BEVsystems is a corporation duly organized,
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validly existing, and in good standing pursuant to the laws of its jurisdiction
of incorporation and has the requisite corporate power and authority to conduct
its business as that business is now being conducted. BEVsystems is, or will
prior to the Closing be, duly qualified as a foreign corporation to do business,
and in good standing, in each jurisdiction where the character of the properties
owned or leased by it, or the nature of its activities, is such that
qualification as a foreign corporation in that jurisdiction is required by law.
3.2 Capitalization. The authorized capital stock of BEVsystems consists of
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80,000,000 shares of common stock, $.01 par value, and 20,000,000 shares of
preferred stock, $.01 par value. There is no other capital stock authorized for
issuance. As of the Effective Date, 14,817,647 shares of BEVsystems' common
stock were validly issued and outstanding, fully paid, and nonassessable. As of
the Effective Date, BEVsystems had not issued any preferred stock; no shares of
its common stock were held in BEVsystems' treasury; and no shares are reserved
for issuance, nor are there outstanding any options, warrants, convertible
instruments or other rights, agreements or commitments to acquire common stock
of BEVsystems, except as fully and completely described on the BEVsystems
Disclosure Document.
3.3 Authority Relative to This Agreement. BEVsystems has the requisite corporate
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power and authority to enter into this Agreement and to carry out its
obligations created by this Agreement. The execution and delivery of this
Agreement and the consummation of the Transaction have been duly authorized and
approved by the requisite corporate authority of BEVsystems and no other
corporate proceedings on the part of BEVsystems are necessary to approve and
adopt this Agreement or to approve the consummation of the Transaction. This
Agreement has been duly and validly executed and delivered by BEVsystems and
constitutes a valid and binding obligation of BEVsystems, enforceable in
accordance with its terms.
3.4 Absence of Breach; No Consents. The execution, delivery, and performance of
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this Agreement, and the performance by BEVsystems of its obligations created by
this Agreement, do not (i) conflict with or result in a breach of any of the
provisions of the Articles of Incorporation (or similar charter document) or
Bylaws (or similar governing document) of BEVsystems; (ii) contravene any law,
ordinance, rule, or regulation of any state or political subdivision of either
or of the United States (except for the HSR Act and compliance with regulatory
or licensing laws all of which, to the extent applicable to BEVsystems (and to
7
the extent within the control of BEVsystems), will be satisfied in all material
respects prior to the Closing), or of any applicable foreign jurisdiction, or
contravene any order, writ, judgment, injunction, decree, determination, or
award of any court or other authority having jurisdiction, or cause the
suspension or revocation of any authorization, consent, approval, or license,
presently in effect, which affects or obligates BEVsystems or any of its
material properties, except in any event when such contravention will not have a
material adverse effect on the business, condition (financial or otherwise),
operations or prospects of BEVsystems, and will not have a material adverse
effect on the validity of this Agreement or on the validity of the consummation
the Transaction; (iii) conflict with or result in a material breach of or
default pursuant to any material indenture or loan or credit agreement or any
other material agreement or instrument to which BEVsystems is a party or by
which BEVsystems may be affected or obligated; (iv) require the authorization,
consent, approval, or license of any third party; or (v) constitute any reason
for the loss or suspension of any permits, licenses, or other authorizations
used in the business of BEVsystems.
3.5 Brokers. No broker, finder, or investment banker is entitled to any
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brokerage, finder's, or other fee or commission in connection with this
Agreement or the Transaction or any related transaction based upon any
agreements, written or oral, made by or on behalf of BEVsystems. BEVsystems does
not have any obligation to pay finder's or broker's fees or commissions in
connection with the exercise of options to renew or extend real estate leases to
which BEVsystems is a party.
3.6 Financial Statements. BEVsystems has heretofore delivered to the Company the
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following:
1. The BEVsystems Unaudited Financial Statements;
2. The BEVsystems Offering Memorandum dated November 30, 2001;
3. The BEVsystems Disclosure Document; and
4. The Projections.
All of the historical financial statements contained in such documents were
prepared from the books and records of BEVsystems. The BEVsystems Unaudited
Financial Statements were prepared in accordance with GAAP, and fairly and
accurately present the financial situation and condition of BEVsystems as at the
dates and for the periods indicated. Without limiting the foregoing, at the date
of the BEVsystems Balance Sheet, BEVsystems owned each of the assets included in
preparation of the BEVsystems Balance Sheet, and the valuation of such assets in
the BEVsystems Balance Sheet is not more than their fair saleable value (on an
item-by-item basis) at that date; and BEVsystems had no Liabilities, other than
those specified in the BEVsystems Balance Sheet, nor any Liabilities in amounts
in excess of the amounts included for them in the BEVsystems Balance Sheet. The
BEVsystems Unaudited Financial Statements fairly present the financial situation
and condition of BEVsystems as at and for the periods indicated, subject to
normal year-end adjustments, none of which will be material. The Projections
reasonable anticipate the results of operations that BEVsystems expects it will
achieve absent extraordinary events or unusual conditions of which BEVsystems is
not presently on notice. From the Effective Date through the Closing Date
BEVsystems will continue to prepare financial statements on the same basis that
it has done so in the past, BEVsystems will promptly deliver those financial
statements to the Company, and the foregoing representations and warranties will
be applicable to each financial statement so prepared and delivered.
3.7 No Undisclosed Liabilities. BEVsystems has no Liabilities which are not
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adequately presented or reserved against on the BEVsystems Balance Sheet, except
Liabilities incurred since the date of BEVsystems Balance Sheet in the ordinary
course of business and consistent with past practice. Without limiting the
foregoing, (a) there are no unpaid leasehold improvements at any of BEVsystems's
Facilities or locations for which BEVsystems is or will be responsible, and (b)
there are no deferred rents due to lessors at or with respect to any of such
Facilities or locations.
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3.8 No Material Adverse Change, Etc. Since the date of the BEVsystems Balance
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Sheet, other than as contemplated or caused by this Agreement, there has not
been (i) any material adverse change in the business, condition (financial or
otherwise), operations, or prospects of BEVsystems; (ii) any damage,
destruction, or loss, whether covered by insurance or not, having a material
adverse effect on the business, condition (financial or otherwise), operations
or prospects of BEVsystems; (iii) any entry into or termination of any material
commitment, contract, agreement, or transaction (including, without limitation,
any material borrowing or capital expenditure or sale or other disposition of
any material asset or assets) by or involving BEVsystems, other than this
Agreement and agreements executed in the ordinary course of business; (iv) any
redemption, repurchase, or other acquisition for value of its capital stock by
BEVsystems, or any dividend or distribution declared, set aside, or paid on
capital stock of BEVsystems; (v) any transfer of any right granted pursuant to
any material lease, license, agreement, patent, trademark, trade name, or
copyright of BEVsystems; (vi) any sale or other disposition of any asset of
BEVsystems, or any mortgage, pledge, or imposition of any lien or other
encumbrance on any asset of BEVsystems, other than in the ordinary course of
business, or any agreement relating to any of the foregoing; of (vii) any
default or breach by BEVsystems in any material respect pursuant to any
contract, license or permit. Since the date of the BEVsystems Balance Sheet,
BEVsystems has conducted its business only in the ordinary and usual course,
and, without limiting the foregoing, no changes have been made in (i) executive
compensation amounts, (ii) the manner in which other employees of BEVsystems are
compensated, (iii) supplemental benefits provided to any such executives or
other employees, or (iv) inventory amounts in relation to sales amounts, except,
in any such event, in the ordinary course of business and, in any event, without
material adverse effect on the business, condition (financial or otherwise),
operations, or prospects of BEVsystems.
3.9 Taxes. BEVsystems has properly filed or caused to be filed all federal,
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state, local, and foreign income and other tax returns, reports, and
declarations that are required by applicable law to be filed by it and has paid,
or made full and adequate provision for the payment of, all federal, state,
local, and foreign income and other taxes properly due for the periods
contemplated by such returns, reports, and declarations.
3.10 Litigation. No investigation or review by any governmental entity with
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respect to BEVsystems is pending or threatened (other than inspections and
reviews customarily made of businesses such as those similar to that
BEVsystems), nor has any governmental entity indicated to BEVsystems an
intention to conduct any such investigation or review. There is no action,
litigation or proceeding pending or threatened against or affecting BEVsystems,
at law or in equity, or before any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality.
3.11 Employees, Etc. There are no collective bargaining, bonus, profit sharing,
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compensation, or other plans, agreements, trusts, funds, or arrangements
maintained by BEVsystems for the benefit of directors, officers or employees of,
and there are no employment, consulting, severance, or indemnification
arrangements, agreements, or understandings between, BEVsystems, on the one
hand, and any current or former directors, officers or other employees (or
Affiliates thereof) of BEVsystems, on the other hand. BEVsystems is not, and
following the Closing will not be, obligated by any express or implied contract
or agreement to employ, directly or as consultant or otherwise, any person for
any specific period of time or until any specific age.
3.12 Compliance With Laws. BEVsystems is in compliance with all, and has
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received no notice of any violation of any, laws or regulations applicable to
its operations, including, without limitation, the laws and regulations relevant
to the use or utilization of premises, or with respect to which compliance is a
condition of engaging in any aspect of the business of BEVsystems, and
BEVsystems has all permits, licenses, zoning rights, and other governmental
authorizations necessary to conduct its business as presently conducted.
3.13 Ownership of Assets. BEVsystems has good, marketable, and insurable title
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to, or valid, effective, and continuing leasehold rights in the event of leased
property, in all personal property owned or leased by it or used by it in the
9
conduct of its business in such a manner as to create the appearance or
reasonable expectation that such property is owned or leased by it, free and
clear of all liens, claims, encumbrances, and charges, except liens for taxes
not yet due and minor imperfections of title and encumbrances, if any, which
singularly and in the aggregate are not substantial in amount and do not
materially detract from the value of the property subject thereto or materially
impair the use thereof. BEVsystems does not know of any potential action by any
person, and no proceedings with respect thereto have been instituted of which
BEVsystems has notice, that would materially affect BEVsystems' ability to use
and to utilize each of BEVsystems' assets in its business. BEVsystems has
received no notices from any mortgagee regarding any properties leased by
BEVsystems.
3.14 Proprietary Rights. BEVsystems possesses full and complete ownership of, or
- ------------------------
adequate and enforceable long-term licenses or other rights to use (without
payment), all of its Proprietary Rights; BEVsystems has not received any notice
of conflict which asserts the rights of any other person with respect thereto;
and BEVsystems has in all material respects performed all of the obligations
required to be performed by it and is not in default in any material respect,
pursuant to any agreement relating to any such Proprietary Right.
3.15 Subsidiaries, Etc. BEVsystems has no subsidiaries.
- -----------------------
3.16 Trade Names. The BEVsystems Disclosure Document identifies each trade name,
- -----------------
fictitious business name, or other similar name pursuant to which BEVsystems has
conducted any part of BEVsystems' business or pursuant to which BEVsystems has
utilized any of BEVsystems' assets during the 10 years preceding the Effective
Date.
3.17 Employee Benefit Plans.
- ----------------------------
3.17.1 All Pension Plans and Welfare Plans of BEVsystems have been administered
- ------
in substantial compliance with their terms, ERISA and, when applicable, the
Code. If applicable, the IRS has issued a favorable determination letter with
respect to the qualification of each such Pension Plan and the exemption of any
corresponding trust. A copy of the most recent determination letter for each
Pension Plan, if any, has been furnished to the Company, and nothing has
occurred since the date of any such determination letter that could cause the
relevant Pension Plan or trust to lose such qualification or exemption.
3.17.2 With respect to each Pension Plan and each Welfare Plan, (i) there is no
- ------
fact, including, without limitation, any Reportable Event, that exists that
would constitute a reason for termination of such Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan, in each case as contemplated by ERISA; (ii) neither
BEVsystems nor any fiduciary, trustee or administrator of any Pension Plan or
Welfare Plan, has engaged in a Prohibited Transaction that could subject
BEVsystems to any material tax or any material penalty imposed by ERISA or the
Code; (iii) BEVsystems has not incurred any material liability to the PBGC
(other than for payment of premiums); and (iv) there is no material Accumulated
Funding Deficiency with respect to any Pension Plan, whether or not waived.
3.17.3 There has been no Plan Termination that has occurred during the 5 year
- ------
period ending on the Effective Date.
3.17.4 BEVsystems has no knowledge of any material liability incurred pursuant
- ------
to Title IV of ERISA by BEVsystems with respect to any Pension Plan maintained
10
by a trade or business (whether or not incorporated) which is under common
control with, or part of a controlled group of corporations with, BEVsystems,
within the meaning of Section 414(b)(c) of the Code.
3.17.5 No Welfare Plan is funded with a trust or other funding method, other
- ------
than insurance policies.
3.17.6 There has occurred no Complete Withdrawal or Partial Withdrawal with
- ------
respect to any Multiemployer Plan that could cause BEVsystems to incur any
material Liability pursuant to or as a result of ERISA, other than to the extent
previously paid or fully provided for in the BEVsystems Balance Sheet, and all
payments required to be made to any such Plan by BEVsystems pursuant to any
applicable collective bargaining agreements have been made.
3.18 Facilities. BEVsystems' Facilities are (as to physical plant and structure)
- ----------------
structurally sound and none of BEVsystems' Facilities, nor any of the vehicles
or other equipment used by BEVsystems in connection with its business, has any
material defects and all of them are in all material respects in good operating
condition and repair and are adequate for the uses to which they are utilized;
none of BEVsystems' Facilities, vehicles or other equipment is in need of
maintenance or repairs, except for ordinary, routine maintenance and repairs
which are not material in nature or cost. BEVsystems is not in breach, violation
or default of any lease affecting BEVsystems' assets with respect to, or as a
result of, which the other party (whether lessor, lessee, sublessor, or
sublessee) thereto has the right to terminate the same, and BEVsystems has not
received notice of any claim or assertion that it is or may be in any such
breach, violation or default.
3.19 Accounts Receivable. All accounts receivable of BEVsystems, whether or not
- -------------------------
specified in the BEVsystems Balance Sheet, represent transactions in the
ordinary course of business, and are current and collectible net of any reserves
specified on the BEVsystems Balance Sheet (which reserves are adequate and were
calculated consistent with past practice).
3.20 Inventories. All Inventories of BEVsystems, whether or not specified in the
- -----------------
BEVsystems Balance Sheet, are of a quality and quantity usable and saleable in
the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which, in the aggregate, are immaterial in
amount. Items included in such Inventories are specified on the books of
BEVsystems, and are valued on the BEVsystems Balance Sheet, at the lower of cost
or market and, in any event, at not greater than their net realizable value, on
an item by item basis, after appropriate deduction for costs of completion,
marketing costs, transportation expense, and allocation of overhead.
3.21 Contracts. The BEVsystems Disclosure Document specifies all contracts,
- ----------------
agreements, or understandings, whether express or implied, written or verbal, to
which BEVsystems is a party. The BEVsystems Disclosure Document also specifies a
brief summary of each such contract, agreement or understanding identified
therein. Without in any respect limiting the foregoing, the BEVsystems
Disclosure Document specifies a description of all leases of properties by
BEVsystems, including all amendments, supplements, extensions and modification
thereof, identifying, inter alia, the date each such document was executed and
its effective period. BEVsystems is not a party to any executory contract to
sell or transfer any part of any leasehold interest of BEVsystems. True and
accurate copies of all leases, and of all amendments, supplements, extensions,
modifications thereof, have heretofore been delivered to the Company by
BEVsystems.
3.22 Accounts Payable. The accounts payable specified on the BEVsystems Balance
- ----------------------
Sheet do, and those specified in the most recent balance sheet included in the
BEVsystems Unaudited Financial Statements do, and those specified on the books
of BEVsystems at the time of the Closing will, specify all amounts owed by
BEVsystems in respect of trade accounts due and other Payables, and the actual
11
Liabilities of BEVsystems in respect of such obligations were not, and will not
be, on any of such dates, in excess of the amounts so specified on the balance
sheets or the books and records of BEVsystems, as the case may be.
3.23 Labor Matters. There are no activities or controversies, including, without
- -------------------
limitation, any labor organizing activities, election petitions or proceedings,
proceedings preparatory thereto, unfair labor practice complaints, labor
strikes, disputes, slowdowns, or work stoppages, pending or, to the best of the
knowledge of BEVsystems, threatened, among BEVsystems and any of its employees.
3.24 Insurance. BEVsystems has insurance policies in full force and effect
- ----------------
insuring the assets of BEVsystems and such insurance policies provide for
coverages which are usual and customary in the business of BEVsystems as to
amount and scope, and are adequate to protect the assets of BEVsystems against
any reasonably foreseeable risk of loss, including business interruption.
BEVsystems has not within the past three (3) years received any notice of
cancellation of any insurance agreement affecting the assets of BEVsystems.
3.25 Environmental Matters and Title to and Utilization of Real Properties.
- --------------------------------------------------------------------------------
Except as disclosed in BEVsystems Disclosure Document, BEVsystems owns fee
simple, insured title to all real property owned by BEVsystems and has the
unfettered right to use such real property, and BEVsystems is not aware of any
claim, notice or threat to the effect that its right to own and use such real
property is subject in any way to any challenge, claim, assertion of rights,
proceedings toward condemnation or confiscation, in whole or in part, or is
otherwise subject to challenge. Each parcel of real property owned or leased by
BEVsystems is free of any and all hazardous wastes, toxic substances or other
types of contamination or matters of environmental concern in connection with
any such real property. BEVsystems has, in conjunction with acquiring ownership
of, or any leasehold interest in, real property, (a) caused an audit and
examination to be made as to the existence of any hazardous wastes, toxic
substances, or other types of contamination or matters of environmental concern
affecting each such real property, which examination indicated that such real
property is free of any such wastes, toxic substances or other types of
contamination or matters of environmental concern, and BEVsystems is not subject
to any Liability resulting from or related to any such wastes, substances,
contaminants or matters of environmental concern, and BEVsystems has delivered
to the Company a copy of the report of any and all hazardous wastes, toxic
substances, or other types of contamination or matters of environmental concern,
and BEVsystems is not subject to any Liability resulting from or related to any
such wastes, substances, contaminants, or matters of environmental concern in
connection with any such real property, which examination indicated that such
real property is free of any such wastes, toxic substances or other types of
contamination or matters of environmental concern, and BEVsystems is not subject
to any Liability resulting from or related to any such wastes, substances,
contaminants or matters of environmental concern, and BEVsystems has delivered
to the Company a copy of the report of such audit and examination; and (b)
obtained an appropriate policy of title insurance insuring the interest of
BEVsystems in such real property, which insurance policy was not subject to any
exceptions not reasonably acceptable in the ordinary course of business, and a
copy of which has been delivered to the Company.
3.26 Full Disclosure. The documents, certificates, and other writings furnished
- ---------------------
or to be furnished by or on behalf of BEVsystems to the Company pursuant to this
Agreement, including, but not limited to, the BEVsystems Disclosure Document,
taken together in the aggregate, do not and will not contain any untrue
statement of a material fact, or omit to specify any material fact necessary to
make the statements made, considering the circumstances pursuant to which they
are made, not misleading.
3.27 Options, Warrants and Other Rights and Agreements Affecting BEVsystems'
- --------------------------------------------------------------------------------
Capital Stock. BEVsystems has no authorized or outstanding options, warrants,
- --------------
calls, subscriptions, rights, convertible securities or other securities, as
defined by the provisions of the Securities Act ("BEVsystems Derivative
Securities"), or any commitments, agreements, arrangement or understandings of
12
any manner or nature whatsoever obligating BEVsystems, in any event, to issue
shares of BEVsystems' capital stock or other securities or securities
convertible into or evidencing the right to purchase shares of BEVsystems'
capital stock or BEVsystems Derivative Securities, except as fully and
completely described on the BEVsystems Disclosure Document. Neither BEVsystems
nor any officer, director, or shareholder of BEVsystems is a party to any
agreement, understanding, arrangement or commitment, or obligated by any
provision which creates any rights in any person with respect to the
authorization, issuance, voting, sale or transfer of any shares of BEVsystems'
capital stock or BEVsystems Derivative Securities.
3.28 Internal Accounting Controls. BEVsystems maintains a system of internal
- ------------------------------------
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.29 Evaluation of Risks. BEVsystems has such knowledge and experience in
- ---------------------------
business and financial matters that BEVsystems is capable of evaluating the
Company and the proposed activities thereof, the risks and merits of the
Transaction and of making an informed decision relating thereto; and BEVsystems
is not utilizing any other person regarding the evaluation of those risks and
merits.
3.30 Questionable Payments. Neither BEVsystems, nor any director, officer,
- -----------------------------
agent, employee, or other person associated with or acting on behalf of
BEVsystems has, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign and domestic political
parties or campaigns, from corporate funds; violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended; established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; made any false
or fictitious entry on the books or records of BEVsystems; made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment; given
any favor or gift which is not deductible for federal income tax purposes; or
made any bribe, or kickback, or other payment of a similar or comparable nature,
whether lawful or not, to any person or entity, private, or public, regardless
of form, whether in money, property, or services, to obtain favorable services,
to obtain favorable treatment in securing business or to obtain special
concessions, or to pay for favorable treatment for business secured or for
special concessions already obtained.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company, for itself and for and on behalf of Pocotopaug Investments, Inc., a
Florida corporation and the Company's subsidiary, represents and warrants to
BEVsystems and the Sellers as follows:
4.1 Organization And Qualification. The Company and its subsidiary are
- --------------------------------------
corporations duly organized, validly existing, and in good standing pursuant to
the laws of their jurisdictions of incorporation and have the requisite
corporate power and authority to conduct their businesses as those businesses
are now being conducted. The Company and its subsidiary are, or will prior to
the Closing be, duly qualified as foreign corporations to do business, and in
good standing, in each jurisdiction where the character of the properties owned
or leased by them, or the nature of their activities, is such that qualification
as foreign corporations in those jurisdictions is required by law.
13
4.2 Capitalization. The authorized capital stock of the Company consists of
- --------------------
100,000,000 shares of common stock, no par value, and 5,000,000 shares of
preferred stock, no par value. There is no other capital stock authorized for
issuance by the Company. As of the Effective Date, 79,991,535 shares of the
Company's common stock were validly issued and outstanding, fully paid, and
nonassessable. After the consummation of the Reverse Stock Split, 7,999,154
shares of the Company's common stock will be issued and outstanding, fully paid
and nonassessable. As of the Effective Date, 100 shares of the Company's
preferred stock were validly issued and outstanding. No shares of the Company's
common stock are held in the Company's treasury, and no shares are reserved for
issuance, nor are there outstanding any options, warrants, convertible
instruments or other rights, agreements or commitments to acquire common stock
of the Company, except as fully and completely described on the Company
Disclosure Document. The authorized capital stock of the Company's subsidiary
consists of 1,000,000 shares of common stock, no par value, and 50,000 shares of
preferred stock, no par value. There is no other capital stock authorized for
issuance by the Company's subsidiary. As of the Effective Date, 1,000,000 shares
of the Company's subsidiary's common stock were validly issued and outstanding,
fully paid, and non accessible. As of the Effective Date, 27,500 shares of the
Company's subsidiary's preferred stock were validly issued and outstanding. No
shares of the Company's subsidiary's common stock are held in the Company's
subsidiary's treasury, and no shares are reserved for issuance by that
subsidiary, nor are there outstanding any options, warrants, convertible
instruments or other rights, agreements or commitments to acquire common stock
of that subsidiary, except as fully and completely described on the Company
Disclosure Document.
4.3 Authority Relative to This Agreement. The Company has the requisite
- ---------------------------------------------
corporate power and authority to enter into this Agreement and to carry out its
obligations created by this Agreement. Except as specified on the Company
Disclosure Document, the execution and delivery of this Agreement and the
consummation of the Transaction have been duly authorized and approved by the
requisite corporate authority of the Company and no other corporate proceedings
on the part of the Company are necessary to approve and adopt this Agreement or
to approve the consummation of the Transaction, including delivery of the
Consideration. Except as specified on the Company Disclosure Document, this
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms.
4.4 Absence of Breach; No Consents. The execution, delivery, and performance of
- -----------------------------------
this Agreement, and the performance by the Company of its obligations created by
this Agreement, do not (i) conflict with or result in a breach of any of the
provisions of the Articles of Incorporation or Bylaws of the Company; (ii)
contravene any law, ordinance, rule, or regulation of any state or political
subdivision of either or of the United States (except for the HSR Act and
compliance with regulatory or licensing laws all of which, to the extent
applicable to the Company (and to the extent within the control of the Company),
will be satisfied in all material respects prior to the Closing), or of any
applicable foreign jurisdiction, or contravene any order, writ, judgment,
injunction, decree, determination, or award of any court or other authority
having jurisdiction, or cause the suspension or revocation of any authorization,
consent, approval, or license, presently in effect, which affects or obligates,
the Company or any of its material properties, except in any event when such
contravention will not have a material adverse effect on the business, condition
(financial or otherwise), operations or prospects of the Company, and will not
have a material adverse effect on the validity of this Agreement or on the
validity of the consummation the Transaction; (iii) conflict with or result in a
material breach of or default pursuant to any material indenture or loan or
credit agreement or any other material agreement or instrument to which the
Company is a party or by which it may be affected or obligated; (iv) require the
authorization, consent, approval, or license of any third party; or (v)
constitute any reason for the loss or suspension of any permits, licenses, or
other authorizations used in the business of the Company.
4.5 Brokers. Except as specified in the Company Disclosure Document, no broker,
- ------------
finder, or investment banker is entitled to any brokerage, finder's, or other
fee or commission in connection with this Agreement or the Transaction or any
14
related transaction based upon any agreements, written or oral, made by or on
behalf of the Company. The Company does not have any obligation to pay finder's
or broker's fees or commissions in connection with the exercise of options to
renew or extend real estate leases to which the Company is a party.
4.6 Financial Statements. The Company has heretofore delivered to BEVsystems the
- -------------------------
following:
1. The Company Audited Financial Statements;
2. The Company Unaudited Financial Statements;
3. The Company Disclosure Document;
4. All documents of the Company filed with the SEC within 4 years preceding
the Effective Date.
5. The Financial Statements of the Company's subsidiary; and
6. The Audit Financial Statements of the Company's subsidiary
All of the historical financial statements contained in such documents were
prepared from the books and records of the Company and the Company's subsidiary.
The Company Audited Financial Statements and the Audited Financial Statements of
the Company's subsidiary were prepared in accordance with GAAP, and fairly and
accurately present the financial situation and condition of the Company and that
subsidiary as at the dates and for the periods indicated. Without limiting the
foregoing, at the date of the Company Balance Sheet, the Company owned each of
the assets included in preparation of the Company Balance Sheet, and the
valuation of such assets in the Company Balance Sheet is not more than their
fair saleable value (on an item-by-item basis) at that date; and the Company had
no Liabilities, other than those specified in the Company Balance Sheet, nor any
Liabilities in amounts in excess of the amounts included for them in the Company
Balance Sheet. Additionally, as of the date of the balance sheet of the
Company's subsidiary, that subsidiary owned each of the assets included in the
preparation of that balance sheet, and the valuation of those assets in that
balance sheet is not more than their salable value (by an item by item basis) at
that date; and that subsidiary has no Liabilities, other than those specified in
the balance sheet of that subsidiary, nor any Liabilities in amounts in excess
of the amounts included for them in that balance sheet. The Company Unaudited
Financial Statements were prepared in a manner consistent with the basis of
presentation used in the Company Audited Financial Statements, and fairly
present the financial situation and condition of the Company as at and for the
periods indicated, subject to normal year-end adjustments, none of which will be
material. The Unaudited Financial Statements of the Company's subsidiary were
prepared in a manner consistent with basis of presentation used in the Audited
Financial Statements of that subsidiary, and fairly present the financial
situation and condition of that subsidiary as at and for the periods indicated,
subject to normal year end adjustments, none of which will be material. From the
Effective Date through the Closing Date, the Company will continue to prepare
financial statements on the same basis that it has done so in the past, and the
Company will promptly deliver those financial statements to BEVsystems, and the
foregoing representations and warranties will be applicable to each financial
statement so prepared and delivered. From the Effective Date and through the
Closing Date, the Company will cause its subsidiary to continue to prepare
financial statements on the same basis that such subsidiary has done so in the
past, and the Company will promptly deliver those financial statements to
BEVsystems, and the foregoing representations and warranties will be applicable
to each financial statement so prepared and delivered.
4.7 No Undisclosed Liabilities. The Company and the Company's subsidiary have no
- -------------------------------
Liabilities which are not adequately presented or reserved against on the
Company Balance Sheet, and the most recent balance sheet of that subsidiary,
except Liabilities incurred since the date of the Company Balance Sheet and the
most recent balance sheet of that subsidiary in the ordinary course of business
and consistent with past practice. Without limiting the foregoing, (a) there are
no unpaid leasehold improvements at any of the Company's' Facilities or
locations for which the Company is or will be responsible, (b) there are no
unpaid lease hold improvements at any of the Facilities of the Company's
subsidiary or locations for which that subsidiary is or will be responsible, and
(c) there are no deferred rents due to lessors at or with respect to any of such
Facilities or locations.
15
4.8 No Material Adverse Change, Etc. Since the dates of the Company Balance
- ---------------------------------------
Sheet and the most recent balance sheet of the Company's subsidiary, other than
as contemplated or caused by this Agreement, there has not been (i) any material
adverse change in the business, condition (financial or otherwise), operations,
or prospects of the Company or that subsidiary; (ii) any damage, destruction, or
loss, whether covered by insurance or not, having a material adverse effect on
the business, condition (financial or otherwise), operations or prospects of the
Company or that subsidiary; (iii) any entry into or termination of any material
commitment, contract, agreement, or transaction (including, without limitation,
any material borrowing or capital expenditure or sale or other disposition of
any material asset or assets) by or involving the Company or that subsidiary,
other than this Agreement and agreements executed in the ordinary course of
business; (iv) any redemption, repurchase, or other acquisition for value of its
capital stock by the Company or that subsidiary, or any dividend or distribution
declared, set aside, or paid on capital stock of the Company or that subsidiary;
(v) any transfer of or right granted pursuant to any material lease, license,
agreement, patent, trademark, trade name, or copyright of the Company or that
subsidiary ; (vi) any sale or other disposition of any asset of the Company or
that subsidiary, or any mortgage, pledge, or imposition of any lien or other
encumbrance on any asset of the Company or that subsidiary, other than in the
ordinary course of business, or any agreement relating to any of the foregoing;
of (vii) any default or breach by the Company or that subsidiary in any material
respect pursuant to any contract, license or permit. Since the date of the
Company Balance Sheet and the most recent balance sheet of the Company's
subsidiary, the Company and the Company's subsidiary have conducted their
businesses only in the ordinary and usual course, and, without limiting the
foregoing, no changes have been made in (i) executive compensation amounts, (ii)
the manner in which other employees of the Company or that subsidiary are
compensated, (iii) supplemental benefits provided to any such executives or
other employees, or (d) inventory amounts in relation to sales amounts, except,
in any event, in the ordinary course of business and, in any event, without
material adverse effect on the business, condition (financial or otherwise),
operations, or prospects of the Company or that subsidiary.
4.9 Taxes. The Company and the Company's subsidiary have properly filed or
- ----------
caused to be filed all federal, state, local, and foreign income and other tax
returns, reports, and declarations that are required by applicable law to be
filed by them, and have paid, or made full and adequate provision for the
payment of, all federal, state, local, and foreign income and other taxes
properly due for the periods contemplated by such returns, reports, and
declarations, except such taxes, if any, as are adequately reserved against in
the Company Balance Sheet and the most recent balance sheet of that subsidiary.
4.10 Litigation. Except as specified on the Company Disclosure Document, no
- -----------------
material investigation or review by any governmental entity with respect to the
Company or the Company's subsidiary is pending or, to the best of the knowledge
of the Company, threatened (other than inspections and reviews customarily made
of businesses such as that of the Company), nor has any governmental entity
indicated to the Company or the Company's subsidiary an intention to conduct the
same. There is no action, litigation or proceeding pending or, to the best of
the knowledge of the Company, threatened against or affecting the Company or the
Company's subsidiary, at law or in equity, or before any federal, state,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality.
4.11 Employees, Etc. There are no collective bargaining, bonus, profit sharing,
- --------------------
compensation, or other plans, agreements, trust, funds, or arrangements
maintained by the Company or the Company's subsidiary for the benefit of their
directors, officers, or employees, and there are no employment, consulting,
severance, or indemnification arrangements, agreements, or understandings
between the Company or the Company's subsidiary, on the one hand, and any
current or former directors, officers, or other employees (or Affiliates
thereof) of the Company or the Company's subsidiary, on the other hand. Except
as specified on the Company Disclosure Document, the Company and the Company's
16
subsidiary are not, and following the Closing will not be, obligated by any
express or implied contract or agreement to employ, directly or as a consultant
or otherwise, any person for any specific period of time or until any specific
age.
4.12 Compliance With Laws. The Company and the Company's subsidiary are in
- ----------------------------
substantial compliance with all, and has received no notice of any violation of
any, laws or regulations applicable to their operations, including, without
limitation, the use of premises occupied by them, or with respect to which
compliance is a condition of engaging in any aspect of the businesses of the
Company and the Company's subsidiary, and the Company and the Company's
subsidiary have all permits, licenses, zoning rights, and other governmental
authorizations necessary to conduct their businesses as presently conducted.
4.13 Ownership of Assets. Except as specified on the Company Disclosure
- ----------------------------
Document, the Company and the Company's subsidiary have good, marketable, and
insurable title to, or valid, effective, and continuing leasehold rights in the
case of leased property, in all personal property owned or leased by them or
used by them in the conduct of their businesses in such a manner as to create
the appearance or reasonable expectation that such property is owned or leased
by them, free and clear of all liens, claims, encumbrances, and charges, except
liens for taxes not yet due and minor imperfections of title and encumbrances,
if any, which singularly and in the aggregate are not substantial in amount and
do not materially detract from the value of the property subject thereto or
materially impair the use thereof. The Company and the Company's subsidiary do
not know of any potential action by any person, and no proceedings with respect
thereto have been instituted of which the Company or the Company's subsidiary
has notice, that would materially affect the ability of the Company or the
Company's subsidiary to use and to utilize each of such assets in their
businesses. The Company and the Company's subsidiary have received no notices
from any mortgagee regarding any properties leased by the Company or the
Company's subsidiary.
4.14 Proprietary Rights. The Company and the Company's subsidiary possess full
- -------------------------
and complete ownership of, or adequate and enforceable long-term licenses or
other rights to use (without payment), all Proprietary Rights owned by or
registered in the name of the Company or the Company's subsidiary or used in the
business of the Company or the Company's subsidiary; the Company and that
subsidiary have not received any notice of conflict which asserts the rights of
other persons with respect thereto; and the Company and the Company's subsidiary
have in all material respects performed all of the obligations required to be
performed by them, and is not in default in any material respect, pursuant to
any agreement relating to any Proprietary Right.
4.15 Subsidiaries, Etc. The Company has only one subsidiary, which is Proctopaug
- -----------------------
Investments, Inc., a Florida corporation.
4.16 Trade Names. The Company Disclosure Document identifies each trade name,
- -----------------
fictitious business name, or other similar name pursuant to which the Company or
the Company's subsidiary have conducted any part of the Company's' business or
the business of the Company's subsidiary or in which the Company or that
subsidiary has utilized any of the assets of the Company or that subsidiary
during the 10 years preceding the Effective Date.
4.17 Employee Benefit Plans.
- ----------------------------
4.17.1 All Pension Plans and Welfare Plans of the Company and the Company's
- ------
subsidiary have been administered in substantial compliance with their terms,
ERISA and, where applicable, the Code. If applicable, the IRS has issued a
favorable determination letter with respect to the qualification of each such
Pension Plan and the exemption of any corresponding trust. A copy of the most
recent determination letter for each Pension Plan, if any, has been furnished to
BEVsystems, and nothing has occurred since the date of any such determination
17
letter that could cause the relevant Pension Plan or trust to lose such
qualification or exemption.
4.17.2 With respect to each Pension Plan and each Welfare Plan; (i) there is no
- ------
fact, including, without limitation, any Reportable Event, that exists that
would constitute a reason for termination of such Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan, in each case as contemplated by ERISA; (ii) neither the
Company, the Company's subsidiary, nor any fiduciary, trustee or administrator
of any Pension Plan or Welfare Plan, has engaged in a Prohibited Transaction
that could subject the Company or that subsidiary to any material tax or any
material penalty imposed by ERISA or the Code; (iii) the Company and the
Company's subsidiary have not incurred any material liability to the PBGC (other
than for payment of premiums); and (iv) there is no material Accumulated Funding
Deficiency with respect to any Pension Plan, whether or not waived.
4.17.3 There has been no Plan Termination that has occurred during the 5 year
- ------
period ending on the Effective Date.
4.17.4 The Company and the Company's subsidiary have no knowledge of any
- ------
material liability being incurred pursuant to Title IV of ERISA by the Company
or that subsidiary with respect to any Pension Plan maintained by a trade or
business (whether or not incorporated) which is under common control with, or
part of a controlled group of corporations with, the Company, within the meaning
of Section 414 subdivisions (b) and (c) of the Code.
4.17.5 No Welfare Plan is funded with a trust or other funding method, other
- ------
than insurance policies.
4.17.6 There has occurred no Complete Withdrawal or Partial Withdrawal with
- ------
respect to any Multiemployer Plan that could cause the Company or the Company's
subsidiary to incur any material Liability pursuant to or as a result of ERISA,
other than to the extent previously paid or fully provided for in the Company
Balance Sheet and the most recent balance sheet of that subsidiary, and all
payments required to be made to any such Plan by the Company and that subsidiary
pursuant to any applicable collective bargaining agreements have been made.
4.18 Facilities. The Facilities of the Company and the Company's subsidiary are
- ----------------
(as to physical plant and structure) structurally sound and none of those
Facilities, nor any of the vehicles or other equipment used by the Company or
that subsidiary in connection with their businesses, has any material defects
and all of them are in all material respects in good operating condition and
repair and are adequate for the uses to which they are utilized; none of those
Facilities, vehicles or other equipment is in need of maintenance or repairs,
except for ordinary, routine maintenance and repairs which are not material in
nature or cost. The Company and the Company's subsidiary are not in breach,
violation, or default of any lease with respect to or as a result of which the
other party (whether lessor, lessee, sublessor, or sublessee) thereto has the
right to terminate the same, and the Company or that subsidiary have not
received notice of any claim or assertion that they are or may be in any such
breach, violation, or default.
4.19 Accounts Receivable. All accounts receivable of the Company and the
- ---------------------------
Company's subsidiary, whether or not specified in the Company Balance Sheet and
the most recent balance sheet of that subsidiary, represent transactions in the
ordinary course of business, and are current and collectible net of any reserves
specified on the Company Balance Sheet and the most recent balance sheet of that
subsidiary (which reserves are adequate and were calculated consistent with past
practice).
4.20 Inventories. All Inventories of the Company and the Company's subsidiary,
- -----------------
whether or not specified in the Company Balance Sheet and the most recent
balance sheet of that subsidiary, are of a quality and quantity usable and
18
saleable in the ordinary course of business, except for obsolete items and items
of below-standard quality, all of which, in the aggregate, are immaterial in
amount. Items included in such Inventories are specified on the books of the
Company and that subsidiary have, and are valued on the Company Balance Sheet
and the most recent balance sheet of that subsidiary, at the lower of cost or
market and, in any event, at not greater than their net realizable value, on an
item by item basis, after appropriate deduction for costs of completion,
marketing costs, transportation expense, and allocation of overhead.
4.21 Contracts. The Company Disclosure Document specifies all contracts,
- ----------------
agreements, or understandings, whether express or implied, written or verbal, to
which the Company or the Company's subsidiary is a party. The Company Disclosure
Document also specifies a brief summary of each such contract, agreement or
understanding identified therein. Without in any respect limiting the foregoing,
The Company Disclosure Document specifies a description of all leases of
properties by the Company or the Company's subsidiary, including all amendments,
supplements, extensions and modification thereof, identifying, inter alia, the
date each such document was executed and its effective period. The Company and
the Company's subsidiary are not a parties to any executory contract to sell or
transfer any part of any leasehold interest of the Company or that subsidiary.
True and accurate copies of all leases, and of all amendments, supplements,
extensions, and modifications thereof, have heretofore been delivered to
BEVsystems by the Company.
4.22 Accounts Payable. The accounts payable specified on the Company Balance
- -----------------------
Sheet do, and those specified in the most recent balance sheet included in the
Company Unaudited Financial Statements and the most recent balance sheet of the
Company's subsidiary do, and those specified on the books of the Company and
that subsidiary at the time of the Closing will, specify all amounts owed by the
Company and that subsidiary in respect of trade accounts due and other Payables,
and the actual Liabilities of the Company and that subsidiary in respect of such
obligations were not, and will not be, on any of such dates, in excess of the
amounts so specified on the balance sheets or the books and records of the
Company and that subsidiary, as the case may be.
4.23 Labor Matters. There are no activities or controversies, including, without
- -------------------
limitation, any labor organizing activities, election petitions or proceedings,
proceedings preparatory thereto, unfair labor practice complaints, labor
strikes, disputes, slowdowns, or work stoppages, pending or, to the best of the
knowledge of the Company, threatened, among the Company or the Company's
subsidiary and any of their employees.
4.24 Insurance. The Company and the Company's subsidiary have insurance policies
- ---------------
in full force and effect insuring their assets and such insurance policies
provide for coverages which are usual and customary in the businesses of the
Company and that subsidiary as to amount and scope, and are adequate to protect
the assets of the Company and that subsidiary against any reasonably foreseeable
risk of loss, including business interruption. The Company and the Company's
subsidiary have not within the past three (3) years received any notice of
cancellation of any insurance agreement affecting the assets of the Company or
the Company's subsidiary.
4.25 Environmental Matters and Title to and Utilization of Real Properties.
- --------------------------------------------------------------------------------
Except as disclosed in the Company Disclosure Document, the Company and the
Company's subsidiary own fee simple, insured title to all real property owned by
them and have the unfettered right to use the such real property, and the
Company and that subsidiary are not aware of any claim, notice or threat to the
effect that their right to own and use such real property is subject in any way
to any challenge, claim, assertion of rights, proceedings toward condemnation or
confiscation, in whole or in part, or is otherwise subject to challenge. Each
parcel of real property owned or leased by the Company and the Company's
subsidiary is free of any and all hazardous wastes, toxic substances or other
types of contamination or matters of environmental concern in connection with
any such property. The Company and the Company's subsidiary have, in conjunction
with acquiring ownership of, or any leasehold interest in, real property, (a)
caused an audit and examination to be made as to the existence of any hazardous
19
wastes, toxic substances, or other types of contamination or matters of
environmental concern affecting each such real property, which examination
indicated that such real property is free of any such wastes, toxic substances
or other types of contamination or matters of environmental concern, and the
Company or the Company's subsidiary are not subject to any Liability resulting
from or related to any such wastes, substances, contaminants or matters of
environmental concern, and the Company has delivered a copy of the report of
such audit and examination to BEVsystems; and (b) obtained an appropriate policy
of title insurance insuring the interest of the Company and that subsidiary in
such real property, which insurance policy was not subject to any exceptions not
reasonably acceptable in the ordinary course of business, and a copy of which
has been delivered by the Company to BEVsystems.
4.26 Full Disclosure. The documents, certificates, and other writings furnished
- ---------------------
or to be furnished by or on behalf of the Company to BEVsystems pursuant to this
Agreement, including, but not limited to, the Company Disclosure Document, taken
together in the aggregate, do not and will not contain any untrue statement of a
material fact, or omit to specify any material fact necessary to make the
statements made, considering the circumstances pursuant to which they are made,
not misleading.
4.27 Options, Warrants and Other Rights and Agreements Affecting Capital Stock.
- --------------------------------------------------------------------------------
Except as specified on the Company Disclosure Document, the Company and the
Company's subsidiary have no authorized or outstanding options, warrants, calls,
subscriptions, rights, convertible securities or other securities, as defined by
the provisions of the Securities Act (collectively, "Company Derivative
Securities"), or any commitments, agreements, arrangement or understandings of
any manner or nature whatsoever obligating the Company or that subsidiary, in
any event, to issue shares of capital stock or other securities or securities
convertible into or evidencing the right to purchase shares of the capital stock
or Company Derivative Securities. Neither the Company, the Company's subsidiary,
nor any officer, director, or shareholder of the Company or that subsidiary is a
party to any agreement, understanding, arrangement or commitment, or obligated
by an provision which creates any rights in any person with respect to the
authorization, issuance, voting, sale or transfer of any shares of capital stock
or Company Derivative Securities.
4.28 Internal Accounting Controls. The Company and the Company's subsidiary
- ------------------------------------
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
4.29 Private Offering. The issuance by the Company of the Subject Shares is
- ------------------------
intended to be exempt from the registration and prospectus delivery requirements
of the Securities Act. The Company and all persons acting on its behalf have not
made, and will not make, offers or sales of any securities that might be
integrated with issuance of the Subject Shares and which would disqualify the
Company from relying on those exemptions from the registration and prospectus
delivery requirements of the Securities Act specified by the provisions of
Section 4(2) of the Securities Act and Rule 506 of Regulation D and Regulation
S. Neither the Company, nor any person acting on its behalf, has directly or
indirectly made any offers or sales in any security of the Company or solicited
any offers to purchase any securities of the Company pursuant to circumstances
that would cause the issuance of the Subject Shares, pursuant to this Agreement,
to be integrated with prior offerings by the Company for the purposes of the
Securities Act.
4.30 Evaluation of Risks. The Company has such knowledge and experience in
- ---------------------------
business and financial matters that the Company is capable of evaluating the
BEVsystems and the activities thereof, the risks and merits of the Transaction
20
and of making an informed decision relating thereto; and the Company is not
utilizing any other person regarding the evaluation of those risks and merits.
4.31 Questionable Payments. Neither the Company nor the Company's subsidiary,
- ----------------------------
nor any director, officer, agent, employee, or other person associated with or
acting on behalf of the Company or that subsidiary has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts, entertainment, or
other unlawful expenses relating to political activity; made any unlawful
payment to foreign and domestic political parties or campaigns, from corporate
funds; violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended; established or maintained any unlawful or unrecorded fund of corporate
monies or other assets; made any false or fictitious entry on the books or
records of the Company or that subsidiary; made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment; given any favor or gift
which is not deductible for federal income tax purposes; or made any bribe, or
kickback, or other payment of a similar or comparable nature, whether lawful or
not, to any person or entity, private, or public, regardless of form, whether in
money, property, or services, to obtain favorable services, to obtain favorable
treatment in securing business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained.
ARTICLES V
COVENANTS OF BEVSYSTEMS
BEVsystems hereby covenants with the Company the following:
5.1 Affirmative Covenants. From the Effective Date through the Closing Date,
- ----------------------------
BEVsystems will take every action reasonably required of it to satisfy the
conditions to Closing set forth in this Agreement and otherwise to ensure the
prompt and expedient consummation of the Transaction substantially as
contemplated by the provisions of this Agreement, and will exert all reasonable
efforts to cause the Transaction to be consummated; provided, however that in
all instances the representations and warranties of the Company in this
Agreement are and remain true and accurate and that the covenants and agreements
of the Company in this Agreement are performed and that the conditions to the
obligations of BEVsystems set forth in this Agreement are not incapable of
satisfaction and subject, at all times, to the right and ability of the
directors of BEVsystems to satisfy their fiduciary obligations.
5.2 Access and Information. BEVsystems shall provide to the Company and to the
- ----------------------------
Company's' accountants, counsel and other representatives reasonable access
during normal business hours during the period prior to the Closing to all of
its properties, books, contracts, commitments, records (including, but not
limited to, tax returns), and personnel, and, during such period, BEVsystems
shall furnish promptly to the Company (i) all written communications to its
directors or to its shareholders generally, (ii) internal monthly financial
statements when and as available, and (iii) all other information concerning its
business, properties, and personnel as the Company may request, but no
investigation pursuant to this section shall affect any representations or
warranties of BEVsystems, or the conditions to the obligations of the Company to
consummate the Transaction. In the event of the termination of this Agreement,
BEVsystems will, and will cause its representatives to, deliver to the Company
or destroy all documents, work papers, and other material, and all copies
thereof, obtained by BEVsystems or on its behalf from the Company as a result of
this Agreement or in connection with this Agreement, whether so obtained before
or after the execution of this Agreement, and BEVsystems will hold in confidence
all confidential information, that has been designated as such by the Company in
writing or by appropriate and obvious notation, and will not use any such
confidential information, except in connection with the Transaction, until such
time as such information is otherwise publicly available. BEVsystems and its
representatives shall assert their rights pursuant to this Agreement in such
manner as to minimize interference with the business of the Company.
21
5.3 Cooperation. BEVsystems shall cooperate with the Company and its counsel,
- -----------------
accountants and agents in every way in consummating the Transaction and in
delivering all documents and instruments deemed reasonably necessary or useful
by counsel to the Company.
5.4 No Solicitation. BEVsystems, and those acting on behalf of any of
- ----------------------
BEVsystems, will not, and BEVsystems will use its best efforts to cause its
officers, employees, agents, and representatives (including any investment
banker) not, directly or indirectly, to solicit, encourage, or initiate any
discussions with, or negotiate or otherwise deal with, or provide any
information to, any person other than the Company and its officers, employees,
and agents, concerning any merger, sale of substantial assets, or similar
transaction involving BEVsystems or division of BEVsystems or any sale of any of
its capital stock or division of BEVsystems. BEVsystems will notify the Company
immediately upon receipt of any inquiry, offer or proposal relating to any of
the foregoing. None of the foregoing shall prohibit providing information to
other persons in a manner in keeping with the ordinary conduct of BEVsystems'
business, or providing information to government authorities.
5.5 Conduct of Business Pending the Closing of the Transaction. Prior to the
- ------------------------------------------------------------------
consummation of the Transaction or the termination of this Agreement pursuant to
its terms, unless the Company shall otherwise consent in writing, and except as
otherwise contemplated by this Agreement, BEVsystems will comply with each of
the following:
(1) The business of BEVsystems shall be conducted only in the ordinary and usual
course, BEVsystems shall use reasonable efforts to keep intact its business
organization and goodwill, keep available the services of its officers and
employees and maintain good relationships with suppliers, lenders, creditors,
distributors, employees, customers, and other persons having business or
financial relationships with BEVsystems, and BEVsystems shall immediately notify
the Company of any event or occurrence or emergency material to, and not in the
ordinary and usual course of business of, BEVsystems.
(2) BEVsystems shall not (a) amend its Articles of Incorporation (or similar
charter document) or Bylaws (or similar governing document), or (b) split,
combine, or reclassify any of its outstanding securities or declare, set aside,
or pay any dividend or other distribution on or make or agree or commit to make
any exchange for or redemption of any such securities payable in cash, stock, or
property.
(3) BEVsystems shall not (a) issue or agree to issue any additional shares of,
or rights of any kind to acquire any shares of, its capital stock of any class,
or (b) enter into any contract, agreement, commitment, or arrangement with
respect to any of the foregoing.
(4) BEVsystems shall not create, incur, or assume any long-term or short-term
indebtedness for money borrowed or make any capital expenditures or commitment
for capital expenditures, except in the ordinary course of business and
consistent with past practice.
(5) BEVsystems shall not (a) adopt, enter into, or amend any bonus,
profit-sharing, compensation, stock option, warrant, pension, retirement,
deferred compensation, employment, severance, termination, or other employee
benefit plan, agreement, trust fund, or arrangement for the benefit or welfare
of any officer, director or employee; or (b) agree to any material (in relation
to historical compensation) increase in the compensation payable or to become
payable to, or any increase in the contractual term of employment of, any
officer, director, or employee, except, with respect to employees who are not
officers or directors, in the ordinary course of business in accordance with
past practice.
22
(6) BEVsystems shall not sell, lease, mortgage, encumber, or otherwise dispose
of or grant any interest in any of BEVsystems' assets or properties, except for
sales, encumbrances, and other dispositions or grants in the ordinary course of
business and consistent with past practice and except for liens for taxes not
yet due or liens or encumbrances that are not material in amount or effect and
do not impair the use of BEVsystems' property, or as specifically provided for
or permitted in this Agreement.
(7) BEVsystems shall not enter into, or terminate, any material contract,
agreement, commitment, or understanding.
(8) BEVsystems shall not enter into any agreement, commitment, or understanding,
whether in writing or otherwise, with respect to any of the matters referred to
in Paragraphs (1) through (7), inclusive, of this section.
(9) BEVsystems will continue to file properly and promptly when due all federal,
state, local, foreign and other tax returns, reports, and declarations required
to be filed by BEVsystems and will pay, or make full and adequate provision for
the payment of, all taxes and governmental charges due from or payable by
BEVsystems.
(10) BEVsystems will comply with all laws and regulations applicable to
BEVsystems and BEVsystems' operations.
(11) BEVsystems will maintain in full force and effect insurance coverage of a
type and amount customary in its business, but not less than that presently in
effect.
5.6 Expenses. Whether or not the Transaction is consummated, all costs and
- --------------
expenses incurred by BEVsystems in connection with this Agreement and the
Transaction shall be paid by BEVsystems.
5.7 Publicity. Prior to the Closing any written news releases by BEVsystems
- ---------------
pertaining to this Agreement or the Transaction shall be submitted to the
Company for review and approval prior to release by BEVsystems, and shall be
released only in a form approved by the Company; provided, however, that such
review and approval shall not be required of releases by BEVsystems if prior
review and approval would prevent the timely and accurate dissemination of such
press release as required to comply, in the judgment of counsel, with any
applicable law, rule or policy.
5.8 Updating of BEVsystems Disclosure Document. BEVsystems shall notify the
- --------------------------------------------------
Company of any changes, additions or events which may cause any change in or
addition to the BEVsystems Disclosure Agreement promptly after the occurrence of
the same and at the Closing by the delivery of appropriate updates to the
BEVsystems Disclosure Document. No notification made pursuant to this section
shall be deemed to cure any breach of any representation or warranty made in
this Agreement, unless the Company specifically agrees thereto in writing nor
shall any such notification be considered to constitute or result in a waiver by
the Company of any condition set forth in this Agreement.
5.9 Indemnification For Brokerage Fees. In addition to any other indemnification
- ---------------------------------------
contemplated by the provisions of this Agreement, if any person shall assert
against the Company a claim to a fee, commission, or other compensation on
account of alleged performance of services as a broker of finder for or on
behalf of BEVsystems, in connection with or as a result of the Transaction,
BEVsystems shall (subject to next sentence) indemnify and hold the Company and
the Company's Affiliates, officers, directors, employees, accountants, auditors,
attorneys, partners, agents and other representatives harmless from and against
any and all losses, liabilities, claims, damages, and expenses whatsoever as and
when incurred resulting from, based upon or in connection with such claim by
such person, and BEVsystems shall, at its expense, defend, any and all lawsuits,
23
actions, proceedings (formal or informal), or investigations involving any such
claim that may at any time be brought against the Company and satisfy promptly
any settlement or judgment resulting therefrom; but, if BEVsystems fails to
defend any such lawsuit, action, proceeding, or investigation in a timely
manner, the Company shall have the right to defend and settle the same and pay
any judgment or settlement pertaining thereto, as the Company may reasonably
deem appropriate, at the cost of BEVsystems. If, however, it is ultimately
determined in any suit, action, or proceeding (in which the Company was provided
the opportunity to have its counsel participate in the defense) that the Company
is solely responsible for any compensation due and payable to such broker or
finder or such services were performed solely for the Company, BEVsystems shall
not be responsible pursuant to this section and amounts therefor paid by
BEVsystems because of this section shall be reimbursed by the Company.
5.10 Information Furnished Regarding SB-2. The information provided by
- -----------------------------------------------
BEVsystems specifically for inclusion in the Form SB-2 or any amendments or
supplement thereto, at the time that the SB-2 Form is filed or becomes
effective, will 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, considering the circumstances pursuant to which those
statements were made, not misleading.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company, for itself and for and on behalf of its subsidiary, covenants with
BEVsystems and the Sellers as follows:
6.1 Affirmative Covenants. From the Effective Date through the Closing Date, the
- --------------------------
Company will take every action reasonably required of it to satisfy the
conditions to Closing set forth in this Agreement and otherwise to ensure the
prompt and expedient consummation of the Transaction substantially as
contemplated by the provisions of this Agreement, and will exert all reasonable
efforts to cause the Transaction to be consummated; provided however, that in
all instances representations and warranties of BEVsystems in this Agreement are
and remain true and accurate and that the covenants and agreements of BEVsystems
in this Agreement are performed and that the conditions to the obligations of
the Company set forth in this Agreement are not incapable of satisfaction and
subject, at all times, to the right and ability of the directors of the Company
to satisfy their fiduciary obligations.
6.2 Access and Information. The Company shall provide to BEVsystems and to
- ----------------------------
BEVsystems' accountants, counsel and other representatives reasonable access
during normal business hours during the period prior to the Closing to all of
the properties, books, contracts, commitments, records (including, but not
limited to, tax returns) of the Company and the Company's subsidiary, and
personnel, and, during such period, the Company shall furnish promptly to
BEVsystems (i) all written communications to its directors or to its
shareholders generally, (ii) internal monthly financial statements when and as
available, and (iii) all other information concerning the business, properties,
and personnel of the Company and the Company's subsidiary as BEVsystems may
request, but no investigation pursuant to this section shall affect any
representations or warranties of the Company, or the conditions to the
obligations of BEVsystems to consummate the Transaction specified in this
Agreement. In the event of the termination of this Agreement, the Company will,
and will cause its representatives to, deliver to BEVsystems or destroy all
documents, work papers, and other material, and all copies thereof, obtained by
the Company or on its behalf from BEVsystems as a result of this Agreement or in
connection with this Agreement, whether so obtained before or after the
execution of this Agreement, and the Company will hold in confidence all
confidential information, that has been designated as such by BEVsystems in
writing or by appropriate and obvious notation, and will not use any such
confidential information, except in connection with the Transaction, until such
24
time as such information is otherwise publicly available. The Company and its
representatives shall assert their rights pursuant to this Agreement in such
manner as to minimize interference with the business of BEVsystems.
6.3 Cooperation. The Company shall cooperate with BEVsystems and its counsel,
- -----------------
accountants and agents in every way in consummating the Transaction and in
delivering all documents and instruments deemed reasonably necessary or useful
by counsel to BEVsystems.
6.4 No Solicitation. The Company, and those acting on behalf of any of the
- ---------------------
Company, will not, and the Company will use its best efforts to cause its
officers, employees, agents, and representatives (including any investment
banker) not, directly or indirectly, to solicit, encourage, or initiate any
discussions with, or negotiate or otherwise deal with, or provide any
information to, any person other than BEVsystems and its officers, employees,
and agents, concerning any merger, sale of substantial assets, or similar
transaction involving the Company or division of the Company or any sale of any
of its capital stock or division of the Company. The Company will notify
BEVsystems immediately upon receipt of any inquiry, offer or proposal relating
to any of the foregoing. None of the foregoing shall prohibit providing
information to others in a manner in keeping with the ordinary conduct of the
Company's business, or providing information to government authorities.
6.5 Conduct of Business Pending the Closing of the Transaction. Prior to the
- ------------------------------------------------------------------
consummation of the Transaction or the termination of this Agreement pursuant to
its terms, unless BEVsystems shall otherwise consent in writing, and except as
otherwise contemplated by this Agreement, the Company and the Company's
subsidiary will comply with each of the following:
(1) The businesses of the Company and the Company's subsidiary shall be
conducted only in the ordinary and usual course, the Company and the Company's
subsidiary shall use reasonable efforts to use reasonable efforts to keep intact
their business organization and goodwill, keep available the services of their
officers and employees and maintain good relationships with suppliers, lenders,
creditors, distributors, employees, customers, and other persons having business
or financial relationships with the Company and the Company's subsidiary, and
the Company shall immediately notify BEVsystems of any event or occurrence or
emergency material to, and not in the ordinary and usual course of business of,
the Company or the Company's subsidiary.
(2) Except for the Reverse Stock Split, the Company and the Company's subsidiary
shall not (a) amend their Articles of Incorporation (or similar charter
document) or Bylaws (or similar governing document), or (b) split, combine, or
reclassify any of their outstanding securities or declare, set aside, or pay any
dividend or other distribution on or make or agree or commit to make any
exchange for or redemption of any such securities payable in cash, stock, or
property.
(3) Except for the Reverse Stock Split, the Company and the Company's subsidiary
shall not (a) issue or agree to issue any additional shares of, or rights of any
kind to acquire any shares of, their capital stock of any class, or (b) enter
into any contract, agreement, commitment, or arrangement with respect to any of
the foregoing.
(4) The Company and the Company's subsidiary shall not create, incur, or assume
any long-term or short-term indebtedness for money borrowed or make any capital
expenditures or commitment for capital expenditures, except in the ordinary
course of business and consistent with past practice.
(5) The Company and the Company's subsidiary shall not (a) adopt, enter into, or
amend any bonus, profit-sharing, compensation, stock option, warrant, pension,
retirement, deferred compensation, employment, severance, termination, or other
employee benefit plan, agreement, trust fund, or arrangement for the benefit or
welfare of any officer, director or employee; or (b) agree to any material (in
25
relation to historical compensation) increase in the compensation payable or to
become payable to, or any increase in the contractual term of employment of, any
officer, director, or employee, except, with respect to employees who are not
officers or directors, in the ordinary course of business in accordance with
past practice.
(6) The Company and the Company's subsidiary shall not sell, lease, mortgage,
encumber, or otherwise dispose of or grant any interest in any of their assets
or properties, except for sales, encumbrances, and other dispositions or grants
in the ordinary course of business and consistent with past practice and except
for liens for taxes not yet due or liens or encumbrances that are not material
in amount or effect and do not impair the use of their property, or as
specifically provided for or permitted in this Agreement.
(7) The Company and the Company's subsidiary shall not enter into, or terminate,
any material contract, agreement, commitment, or understanding.
(8) The Company and the Company's subsidiary shall not enter into any agreement,
commitment, or understanding, whether in writing or otherwise, with respect to
any of the matters referred to in Paragraphs (1) through (7), inclusive, of this
section.
(9) The Company and the Company's subsidiary will continue promptly and properly
to file when due all federal, state, local, foreign and other tax returns,
reports, and declarations required to be filed by the Company or that
subsidiary, and will pay, or make full and adequate provision for the payment
of, all taxes and governmental charges due from or payable by the Company or the
Company's subsidiary.
(10) The Company and the Company's subsidiary will comply with all laws and
regulations applicable to the Company or the Company's subsidiary and their
operations.
(11) The Company and the Company's subsidiary will maintain in full force and
effect insurance coverage of a type and amount customary in their businesses,
but not less than that presently in effect.
6.6 Expenses. Whether or not the Transaction in consummated, all costs and
- --------------
expenses incurred by the Company in connection with this Agreement and the
Transaction shall be paid by the Company.
6.7 Publicity. Prior to the Closing, any written news releases by the Company
- ---------------
pertaining to this Agreement or the Transaction shall be submitted to BEVsystems
for review and approval prior to release by the Company, and shall be released
only in a form approved by BEVsystems; provided, however, that (i) such approval
shall not be unreasonably withheld and (ii) such review and approval shall not
be required of releases by the Company, if prior review and approval would
prevent the timely and accurate dissemination of such press release as required
to comply, in the judgment of counsel, with any applicable law, rule, or policy.
6.8 Updating of Company Disclosure Document. The Company shall notify BEVsystems
- --------------------------------------------
of any changes, additions, or events which may cause any change in or addition
to the Company Disclosure Document promptly after the occurrence of the same and
again at the Closing by delivery of appropriate updates to the Company
Disclosure Agreement. No such notification made pursuant to this section shall
be deemed to cure any breach of any representation or warranty made in this
Agreement, unless BEVsystems and the Sellers specifically agree thereto in
writing nor shall any such modification be considered to constitute or result in
a waiver by BEVsystems or any of the Sellers of any condition specified in this
Agreement.
6.9 Registration Statement. a. The Company shall, as soon practicable after the
- ----------------------------
Closing, prepare and file with the SEC a Registration Statement on Form SB-2
("Form SB-2") pursuant to the Securities Act, with respect to the (i) Subject
Shares and (ii) constituent securities to be issued pursuant to all of the
Company Derivative Securities. The Company shall cause the Form SB-2 to comply
26
as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations promulgated
pursuant thereto. The Company shall use all reasonable efforts to cause the Form
SB-2 to be declared effective by the SEC as promptly as practicable. The Company
shall use its best efforts to obtain, on or prior to the effective date of the
Form SB-2, all necessary state securities law or "Blue Sky" permits or approvals
required to enable the (i) shareholders of this Company holding shares of the
Company's common stock which are restricted securities and (ii) recipients of
the constituent securities to be issued pursuant to all of the Company
Derivative Securities to distribute their shares of common stock issued by the
Company.
b. The Form SB-2 and each amendment or supplement thereto, at the time it is
filed or becomes effective, will 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, considering the circumstances pursuant to which
they were made, not misleading; provided, however, that the foregoing shall not
apply to the extent that any such untrue statement of a material fact or
omission to state a material fact was made by the Company in reliance upon and
in conformity with written information concerning BEVsystems furnished by
BEVsystems to the Company specifically for use in the Form SB-2.
c. The Company will inform its shareholders and the holders of the Company
Derivative Securities, promptly after the Company receives notice thereof, of
the time when the Form SB-2 has become effective or any supplement or amendment
has been filed, the issuance of any stop order, the suspension of the
effectiveness of the Form SB-2 or the suspension of qualification by any state
securities regulator in any jurisdiction, or any request by the SEC for
amendment of the Form SB-2 or comments thereon and responses thereto or requests
by the SEC or any state securities regulator for additional information.
6.10 Stop Transfer Orders; Suspension of Qualification. The Company shall not
- ---------------------------------------------------------
make any notation on its records or give instructions to any transfer agent of
the Company, which enlarge the restrictions regarding transfer of the Company's
securities imposed by law. The Company will inform its shareholders, promptly
after the Company receives notice of issuance by the SEC, any state securities
commission or any other regulatory authority, of any stop order or of any order
preventing or suspending the use of any offering of any securities of the
Company, or of the suspension of the qualification of the Subject Shares for
distribution or sale in any jurisdiction, or the initiation of any proceeding
for any such purpose.
6.11 Filing and Furnishing of Information. The Company shall file timely (or
- ---------------------------------------------
obtain extensions in respect thereof and file within the applicable extension
period) all reports required to be filed by the Company after the (i) Effective
Date and (ii) before the Closing Date pursuant to Section 13(a) or 15(d) of the
Exchange Act and to furnish BEVsystems promptly with true and complete copies of
all such reports. Upon the request of BEVsystems, the Company shall deliver
BEVsystems a written certification of a duly authorized officer of the Company
as to whether the Company has complied with such requirements.
6.12 Form D; Blue Sky Laws. The Company shall file a Form D with respect to the
- ---------------------------
Subject Shares as required pursuant to Regulation D. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Subject Shares for, or obtain exemption
for the Subject Shares for, issuance to shareholders of BEVsystems at the
Closing pursuant to this Agreement pursuant to applicable securities or "Blue
Sky" laws of the states of the United States, and shall provide to BEVsystems
evidence of any such action so taken on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the
Subject Shares required pursuant to applicable securities or "Blue Sky" laws of
the states of the United States following the Closing Date.
6.13 Integration. The Company shall not sell, offer for sale or solicit offers
- ------------------
to purchase or otherwise negotiate in respect of any security (as defined in
27
Section 2 of the Securities Act) that would be integrated with the issuance of
the Subject Shares in a manner that would require the registration, pursuant to
the Securities Act, of the issuance of any or all of the Subject Shares.
6.14 Transfer Restrictions. If the shareholders of the Company should decide to
- ---------------------------
dispose of any of the Subject Shares, the Company will inform its shareholders
that they may do so only pursuant to an effective registration statement
pursuant to the Securities Act (such as the SB-2) of the Company or pursuant to
an available exemption from the registration and prospectus delivery
requirements of the Securities Act. In connection with any transfer of any
Subject Shares, other than pursuant to an effective registration statement filed
by the Company, the Company may require the transferor thereof to provide to the
Company a written opinion of counsel, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities pursuant
to the Securities Act, which opinion shall be delivered by counsel for the
Company.
There shall be imprinted, during such time as is required, of the following
legend on the certificates evidencing and representing the Subject Shares:
(begin boldface)
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(end boldface)
6.15 Reverse Stock Split. No later than the Closing Date, the Company shall,
- --------------------------
conditioned upon the approval of the Company's shareholders, cause to occur the
Reverse Stock Split, pursuant to which every 10 shares of issued and outstanding
common stock of the Company shall be exchanged for one share of the Company's
common stock; provided, however, that, in lieu of fractional shares, the Company
shall pay each holder of the Company's common stock entitled to a fractional
share, as a result of the Reverse Stock Split, an amount of cash (without
interest) equal to the proportionate market value of that fractional share,
which market value shall be the average of the last Bid price and last Asked
price quoted on the Bulletin Board on the day immediately preceding the Closing
Date. If, on the Closing Date, the price of the Company's common stock quoted on
the Bulletin Board is 80% or less than the price at which such common stock
would have traded if the Reverse Stock Split had been completed and consummated
on November 16, 2001, the Company will issue or cause to be issued to the
holders of BEVsystems' common stock, in addition to those 30,432,410 shares of
the Company's common stock contemplated by the provisions of Section 2.1 of this
Agreement, an additional 3,992,260 shares of the Company's common stock.
6.16 Removal of Liens and Settlement of Controversy. Prior to the Closing Date,
- ----------------------------------------------------
on an as needed basis, Cifers, for and on behalf of the Company, shall resolve
and settle those claims and controversies against the Company which have
resulted in liens and encumbrances against the Company's Facilities in the
collective, total amount of approximately $315,000.00. Cifers may resolve those
controversies using cash or a convertible note executed by and delivered by the
Company, or any combination thereof. Any such convertible note shall not accrue
interest in excess of 10.5% per annum and may be convertible at the holder's
option, in lieu of cash payment, for shares of the Company's common stock at a
conversion price of $.375 per share after the Reverse Stock Split. In that
regard, in an effort to resolve and settle those controversies, the Company has
signed and delivered such a convertible promissory note, and the Company has
28
granted and issued to the holder of such convertible note warrants to purchase
180,000 shares of the Company's common stock exercisable at a price of $.75 per
share after the Reverse Stock Split.
6.17 Issuance and delivery of the Consideration. On the Closing, the Company
- --------------------------------------------------
shall issue or cause to be issued certificates evidencing and representing the
Subject Shares.
6.18 Indemnification For Brokerage Fees. In addition to any other
- ------------------------------------------------
indemnification contemplated by the provisions of this Agreement, if any person
shall assert against BEVsystems a claim to a fee, commission, or other
compensation because of or resulting from alleged performance of services as a
broker of finder for or on behalf of the Company, in connection with or as a
result of the Transaction, the Company shall (subject to next sentence)
indemnify and hold BEVsystems and BEVsystems' Affiliates, officers, directors,
employees, accountants, auditors, attorneys, partners, agents and other
representatives harmless from and against any and all losses, liabilities,
claims, damages, and expenses whatsoever as and when incurred resulting from,
based upon or in connection with such claim by such person, and the Company
shall, at its expense, defend, any and all lawsuits, actions, proceedings
(formal or informal), or investigations involving any such claim that may at any
time be brought against BEVsystems and satisfy promptly any settlement or
judgment resulting therefrom; but, if the Company fails to defend any such
lawsuit, action, proceeding, or investigation in a timely manner, BEVsystems
shall have the right to defend and settle the same and pay any judgment or
settlement pertaining thereto, as BEVsystems may reasonably deem appropriate, at
the cost of the Company. If, however, it is ultimately determined in any suit,
action, or proceeding (in which BEVsystems was provided the opportunity to have
its counsel participate in the defense) that BEVsystems is solely responsible
for any compensation due and payable to such broker or finder or such services
were performed solely for BEVsystems, the Company shall not be responsible
pursuant to this section and amounts therefor paid by the Company because of
this section shall be reimbursed by BEVsystems.
6.19 Availability of Offer. The Company confirms that the benefits of the
- -----------------------------
Transaction are intended to be available to all shareholders of BEVsystems, and
that no such shareholder is intended to be excluded from participation in the
benefits of the Transaction.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Obligation of the Sellers. The obligation of the Sellers to
- ---------------------------------------------
close the Transaction shall be subject to the performance at or prior to the
Closing of the following conditions, unless the Sellers shall, by a majority in
interest of the Sellers, waive such fulfillment in writing:
(1) This Agreement and the Transaction shall have received all approvals,
consents, authorizations, and waivers from governmental and other regulatory
agencies and other third parties (including lenders, holders of debt securities
and lessors) required to consummate the Transaction.
(2) There shall not be in effect a preliminary or permanent injunction or other
order by any federal or state court which prohibits the consummation of the
Transaction.
(3) The Company shall have performed in all material respects each of its
agreements and obligations specified in this Agreement and required to be
performed on or prior to the Closing and shall have complied with all material
requirements, rules, and regulations of all regulatory authorities having
jurisdiction relating to the Transaction.
29
(4) No material adverse change shall, in the judgment of a majority in interest
of the Sellers, have taken place in the business condition (financial or
otherwise), operations, or prospects of the Company since the Effective Date,
other than those, if any, that result from the changes permitted by the
Transaction and the provisions of this Agreement.
(5) The representations and warranties of the Company set forth in this
Agreement shall be true in all material respects as of the Effective Date and,
except in such respects as, in the judgment of a majority of interest of the
Sellers, do not materially and adversely affect the business, condition
(financial or otherwise), operations, or prospects of the Company as of the
Closing Date, as if those representations and warranties were made as of the
Closing Date.
(6) The Sellers shall have received from the Company an officers' certificate,
executed by the Chief Executive Officer and Chief Financial Officer of the
Company (in their capacities as such), dated the Closing Date, as to the
satisfaction of the conditions in Paragraphs (3), (4), and (5) of this section.
7.2 Conditions to Obligation of the Company. The obligation of the Company to
- ---------------------------------------------
close the Transaction shall be subject to the performance at or prior to the
Closing of the following conditions, unless the Company shall waive such
fulfillment in writing:
(1) This Agreement and the Transaction shall have received all approvals,
consents, authorizations, and waivers from governmental and other regulatory
agencies and other third parties (including lenders, holders of debt securities
and lessors) required by law to consummate the Transaction.
(2) There shall not be in effect a preliminary or permanent injunction or other
order by any federal or state authority which prohibits the consummation of the
Transaction.
(3) BEVsystems and the Sellers shall have performed in all material respects
their agreements and obligations specified in this Agreement required to be
performed on or prior to the Closing and shall have complied with all material
requirements, rules, and regulations of all regulatory authorities having
jurisdiction relating to the Transaction.
(4) No material adverse change shall, in the reasonable judgment of the Company,
have taken place in the business, conditioned (financial or otherwise)
operations or prospects of BEVsystems since the Effective Date, other than
those, if any, that result from changes permitted by the Transaction and the
provisions of this Agreement.
(5) The representations and warranties of BEVsystems set forth in this Agreement
shall be true in all material respects as of the Effective Date and, except in
such respects as, in the reasonable judgment of the Company, do not materially
and adversely affect the business, condition (financial or otherwise),
operations, or prospects of BEVsystems as of the Closing Date as if those
representations and warranties were made as of the Closing Date.
(6) The Company shall have received from BEVsystems an officers' certificate,
executed by the Chief Financial Officer and the Chief Executive Officer of
BEVsystems (in their capacities as such), dated the Closing Date, as to the
satisfaction of the conditions of Paragraphs (3), (4) and (5) of this section.
ARTICLE VIII
SUBJECT SHARES AND SELLERS
30
8.1 Sellers' Ownership Representations. Each of the Sellers represents and
- ------------------------------------------
warrants to the Company, severally and not jointly, that (i) he, she, or it owns
the shares of common stock of BEVsystems set forth opposite, his, her, or its
name on the respective signature page of this Agreement, to be delivered to the
Company at the Closing pursuant to the terms of this Agreement, free and clear
of any and all liens, claims, encumbrances, and rights of others; and (ii) he,
she, or it is fully and freely authorized and entitled to sell, transfer,
assign, deliver, set over, and convey to the Company free and clear title to
those shares, without any further approval or authorization being required.
8.2 Non Registration of Subject Shares. The Sellers, and each of them,
- -------------------------------------------
understand and acknowledge that the Subject Shares will be issued without
Registration in a transaction not involving a public offering and a transaction
in which all recipients are not U.S. persons and that those transactions are
exempt from Registration pursuant to Section 4(2) of the Securities Act and Rule
506 of Regulation D and Regulation S.
8.3 Investment Representation. The covenant of the Company specified in Section
- ------------------------------
6.9 of this Agreement regarding the preparation and filing of the Form SB-2
notwithstanding, each of the Sellers, severally and not jointly, represents and
confirms to the Company that he, she, or it (i) is accredited investor within
the meaning of Rule 501(a) of Regulation D promulgated pursuant to the
Securities Act, and such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an acquisition of
the Subject Shares (ii) is aware of the restriction regarding resale imposed
upon the Subject Shares because of the nature of the Transaction; and (iii) will
receive and accept at the Closing the Subject Shares for investment, and without
any intention to sell, transfer, or otherwise distribute the Subject Shares
acquired by that Seller in any manner that is in violation of the Securities
Act. The certificates evidencing and representing the Subject Shares, when
delivered to the Sellers at the Closing, may have appropriate orders restricting
transfer placed against them on the records of the transfer agent for the
Company and may have placed upon them the legend specified by the provisions of
Section 6.14 of this Agreement. Each Seller agrees not to attempt any transfer
of any his, hers or its Subject Shares without first complying with the
substance of that legend and agrees that satisfaction of the Company may, if the
Company, in its discretion, so requests, depend in part upon (i) an opinion of
counsel acceptable in form and substance to the Company, (ii) a no-action letter
of the SEC, or (iii) equivalent evidence.
ARTICLE IX
TERMINATION
This Agreement and the Transaction may be terminated at any time prior to the
Closing:
(1) By mutual consent of BEVsystems and the Sellers, on the one hand, and the
Company, on the other hand; or
(2) By either BEVsystems and the Sellers, on the one hand, or the Company, on
the other hand, upon written notice to the other, if the conditions to such
party's obligations to consummate the Transaction, in the case of the Sellers,
as specified in Section 7.1 of this Agreement, or, in the case of the Company,
as provided in Section 7.2 of this Agreement, were not, or cannot reasonably be,
satisfied on or before June 1, 2002, unless the failure of condition is the
result of the material breach of this Agreement by the party to this Agreement
seeking to terminate this Agreement.
ARTICLE X
INDEMNIFICATION
31
10.1 Indemnification by the Company. The Company shall indemnify, save and hold
- ------------------------------------
harmless the Sellers, BEVsystems and their Affiliates, officers, employees,
directors, accountants, auditors, attorneys, partners, agents, and other
representatives from and against any and all costs, losses (including, without
limitation, diminution in value), liabilities, damages, lawsuits, deficiencies,
adverse claims, taxes and expenses (whether or not resulting from third-party
claims), including, without limitation, interest, penalties, reasonable
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing (collectively, "Damages"), incurred in connection with or
resulting from any breach of any covenant or warranty, or the inaccuracy of any
representation made by the Company in or pursuant to this Agreement.
10.2 Indemnification by BEVsystems. BEVsystems shall indemnify, save and hold
- ------------------------------------
harmless the Company, and the Company's Affiliates, officers, employees,
directors, accountants, auditors, attorneys, partners, agents and other
representatives, from and against any and all Damages incurred in connection
with or arising out of or resulting from any breach of any covenant or warranty,
or the inaccuracy of any representation, made by BEVsystems in or pursuant to
this Agreement.
10.3 Defense of Third-Party Claims. If any lawsuit or enforcement action is
- -------------------------------------
filed against any party entitled to the benefit of indemnification pursuant to
this Article X, written notice thereof shall be given to the indemnifying party
as promptly as practicable (and in any event no later than fifteen (15) days
after the service of the citation or summons); provided, however, that the
failure of any indemnified party to give timely notice shall not affect the
rights to indemnification contemplated by this Article IX, except to the extent
that the indemnifying party demonstrates actual damage caused by such failure.
After such notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated pursuant to the
terms of its indemnification pursuant to this Article X in connection with such
lawsuit or action, then the indemnifying party shall be entitled, if such party
so decides, to take control of the defense and investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and defend
the same, at the indemnifying party's cost, risk and expense; provided, however,
that the indemnifying party and its counsel shall proceed with diligence and in
good faith with respect thereto. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
resulting therefrom; provided, however, that the indemnified party may, at its
own cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal resulting therefrom.
ARTICLE XI
GENERAL PROVISIONS
11.1. Notices. Any notice, direction or instruction required or permitted to be
- --------------
given pursuant to this Agreement shall be given in writing by (a) telegram,
facsimile transmission or similar method, if confirmed by mail as provided in
this Agreement, (b) by mail, if mailed postage prepaid, by certified mail,
return receipt requested; or (iii) hand delivery to any party to this Agreement
at the address of such party specified below. If given by telegram or facsimile
transmission or similar method or by hand delivery, such notice, direction or
instruction shall be deemed to have been given or made on the day on which such
notice, direction or instruction was delivered, and if mailed, such notice,
direction or instruction shall be deemed to have been given or made on the
second (2nd) business day following the day after which such notice, direction
or instruction was mailed. Any party to this Agreement may, from time to time by
similar notice, give notice of any change of address and, in such event, the
address of such party shall be deemed to be changed accordingly. The address,
telephone number and facsimile transmission number for the notice of each party
are:
32
If to the Company: Aqua Clara Bottling & Distribution, Inc.
1315 Cleveland Street
Clearwater, Florida 33755
Facsimile Machine: 727.446.3999
If to BEVsystems and BEVsystems International, Ltd.
the Sellers: 501 Brickell Key Drive, Suite 203
Miami, Florida 33131
Facsimile Machine:786.425.2208
11.2. Recovery of Enforcement Costs. In the event any party to this Agreement
- --------------------------------------
shall institute any action or proceeding to enforce any provision of this
Agreement, to seek relief from any violation of this Agreement, or to otherwise
obtain any judgment or order relating to or arising from the subject matter of
this Agreement, each prevailing party in such action or proceeding shall be
entitled to receive from each losing party such prevailing party's actual
attorneys' fees and costs incurred to prosecute or defend such action or
proceeding.
11.3. Assignment. No party to this Agreement shall have the right, without the
- ------------------
consent of the other parties to this Agreement, to assign, transfer, sell,
pledge, hypothecate, delegate, or otherwise transfer, whether voluntarily,
involuntarily or by operation of law, any of such party's rights or obligations
created by the provisions of this Agreement, nor shall the parties' rights
created by the provisions of the Agreement be subject to encumbrance or the
claim of creditors. Any such purported assignment, transfer, or delegation shall
be null and void.
11.4. Captions and Interpretations. Captions of the articles and sections of
- --------------------------------------
this Agreement are for convenience and reference only, and the words specified
therein shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction, or meaning of the provisions of this Agreement.
The language in all parts to this Agreement, in all events, shall be construed
in accordance with the fair meaning of that language, as if prepared by all
parties to this Agreement and not strictly for or against any party to this
Agreement. Each party to this Agreement has reviewed and read this Agreement
carefully. The rule of construction, which requires a court to resolve any
ambiguities against the drafting party, shall not apply in interpreting the
provisions of this Agreement.
11.5. Entire Agreement. This Agreement and the respective Disclosure Documents
- -----------------------
are the final written expression and the complete and exclusive statement of all
the agreements, conditions, promises, representations, warranties and covenants
between the parties to this Agreement with respect to the subject matter of this
Agreement, and this Agreement supersedes all prior or contemporaneous
agreements, negotiations, representations, warranties, covenants, understandings
and discussions by and between and among those parties, their respective
representatives, and any other person, with respect to the subject matter
specified in this Agreement. No provision of any Disclosure Document shall
supersede or annul the terms and provisions of this Agreement, unless the matter
specified in such Disclosure Document shall explicitly so provide to the
contrary. In the event of ambiguity in meaning or understanding between the
provisions of this Agreement proper and any Disclosure Document, the provisions
of this Agreement shall prevail and control in all instances.
11.6 Waiver and Modification. No modification, supplement or amendment of this
- -----------------------------
Agreement or of any covenant, representation, warranty, condition, or limitation
specified in this Agreement shall be valid unless the same is made in writing
and duly executed by all parties to this Agreement. No waiver of any covenant,
representation, warranty, condition, or limitation specified in this Agreement
shall be valid, unless the same is made in writing and duly executed by the
party making the waiver. No waiver of any provision of this Agreement shall be
33
deemed, or shall constitute, a waiver of any other provision of this Agreement,
whether or not similar, nor shall any waiver of any provision of this Agreement
constitute a continuing waiver of that provision.
11.7 Further Assurances. The parties to this Agreement shall from time to time
- -------------------------
sign and deliver any further instruments and take any further actions as may be
necessary to effectuate the intent and purposes of this Agreement.
11.8 De Minimis Claims. No party to this Agreement shall bring any action
- -------------------------
against any other party to this Agreement with respect to the subject matter of
this Agreement, unless the aggregate amount of all claims so brought in relation
to the subject matter of this Agreement exceeds $50,000.00; provided, however,
that the foregoing shall not prevent or preclude actions seeking injunctive or
other equitable forms of relief.
11.9 Number and Gender. Whenever the singular number is used in this Agreement
- -----------------------
and, when required by the context, the same shall include the plural, and vice
versa; the masculine gender shall include the feminine and the neuter genders,
and vice versa, and the word "person" shall include individual, company, sole
proprietorship, corporation, joint venture, association, joint stock company,
fraternal order, cooperative, league, club, society, organization, trust,
estate, governmental agency, political subdivision or authority, firm,
municipality, congregation, partnership, or other form of entity, whether active
or passive.
11.10 Successors and Assigns. This Agreement and each of its provisions shall
- ------------------------------
obligate the heirs, executors, administrators, successors, and assigns of each
of the parties to this Agreement. Nothing specified in this section, however,
shall be a consent to the assignment or delegation by any party of such party's
respective rights and obligations created by the provisions of this Agreement.
11.11 Third Party Beneficiaries. Except as expressly specified by the provisions
- --------------------------------
of this Agreement, this Agreement shall not be construed to confer upon or give
to any person, other than the parties to this Agreement, any right, remedy or
claim pursuant to, or by reason of, this Agreement or of any term or condition
of this Agreement.
11.12 Severability. In the event any part of this Agreement, for any reason, is
- -------------------
determined by a court of competent jurisdiction to be invalid, such
determination shall not affect the validity of any remaining portion of this
Agreement, which remaining portion shall remain in full force and effect as if
this Agreement had been executed with the invalid portion thereof eliminated. It
is hereby declared the intention of the parties to this Agreement that those
parties would have executed the remaining portion of this Agreement without
including any such part, parts, or portion which, for any reason, may be
hereafter determined to be invalid.
11.13 Governmental Rules and Regulations. The Transaction is and shall remain
- -------------------------------------------
subject to any and all present and future orders, rules and regulations of any
duly constituted authority having jurisdiction of the Transaction.
11.14 Execution in Counterparts. This Agreement may be prepared in multiple
- ----------------------------------
copies and forwarded to each of the parties for execution. All of the signatures
of the parties to this Agreement may be affixed to one copy or to separate
copies of this Agreement and when all such copies are received and signed by all
of those parties, those copies shall constitute one agreement, which is not
otherwise separable or divisible. Counsel for BEVsystems shall keep all of such
signed copies and shall conform one copy to show all of those signatures and the
dates thereof and shall mail a copy of such conformed copy to each of those
parties within thirty (30) days after the receipt by such counsel of the last
signed copy, and such counsel shall cause one such conformed copy to be filed in
the principal office of such counsel.
34
11.15 Reservation of Rights. The failure of any party to this Agreement at any
- -----------------------------
time or times to require strict performance by any other party to this Agreement
of any of the warranties, representations, covenants, terms, conditions and
provisions specified in this Agreement shall not waive, affect or diminish any
right of such party failing to require strict performance to demand strict
compliance and performance therewith and with any other provisions, warranties,
terms, and conditions specified in this Agreement.
11.16 Survival of Covenants, Representations and Warranties. All covenants,
- ----------------------------------------------------------------
representations, and warranties made by each party to this Agreement shall be
deemed made for the purpose of inducing the other parties to this Agreement to
enter into and execute this Agreement. The representations, warranties, and
covenants specified in this Agreement shall survive the Closing and shall
survive any investigation by any such party, whether before or after the
execution of this Agreement. The covenants, representations, and warranties of
the Company, on the one hand, and BEVsystems and the Sellers, on the other hand,
are made only to and for the benefit of each other and shall not create or vest
rights in other persons.
11.17 Concurrent Remedies. No right or remedy specified in this Agreement
- ----------------------------
conferred on or reserved to the parties to this Agreement is exclusive of any
other right or remedy specified in this Agreement or by law or equity provided
or permitted; but each such right and remedy shall be cumulative of, and in
addition to, every other right and remedy specified in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, and may be
enforced concurrently therewith or from time to time. The termination of this
Agreement for any reason whatsoever shall not prejudice any right or remedy
which any party may have, either at law, in equity, or pursuant to the
provisions of this Agreement.
11.18 Governing Law. This Agreement shall be deemed to have been entered into in
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the State of Colorado, and all questions concerning the validity,
interpretation, or performance of any of the terms, conditions and provisions of
this Agreement or of any of the rights or obligations of the parties shall be
governed by, and resolved in accordance with, the laws of the State of Colorado,
without regard to conflicts of law principles. Any and all actions or
proceedings, at law or in equity, to enforce or interpret the provisions of this
Agreement shall be litigated in courts having sites within the State of
Colorado. No claim, demand, action, proceeding, litigation, hearing, motion or
lawsuit resulting from or with respect to this Agreement shall be commenced or
prosecuted in any jurisdiction other than the State of Colorado, and any
judgment, determination, finding or conclusion reached or rendered in any other
jurisdiction shall be null and void. Each party to this Agreement hereby
consents expressly to the jurisdiction of any local, state or federal court
located within the State of Colorado and consents that any service of process in
such action or proceeding may be made by personal service upon such party
wherever such party may be then located, or by certified or registered mail
directed to such party at such party's last known address.
11.19 Force Majeure. If any party to this Agreement is rendered unable,
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completely or partially, by the occurrence of an event of "force majeure" (as
that term is defined later in this section) to perform such party's obligations
created by the provisions of this Agreement, such party shall give to each other
party to this Agreement prompt written notice of the event of "force majeure"
with reasonably complete particulars concerning such event; thereupon, the
obligations of the party giving such notice, so far as those obligations are
affected by the event of "force majeure," shall be suspended during, but no
longer than, the continuance of the event of "force majeure." The party to this
Agreement affected by such event of "force majeure" shall use all reasonable
diligence to resolve, eliminate and terminate the event of "force majeure" as
quickly as practicable. The requirement that an event of "force majeure" shall
be remedied with all reasonable dispatch as specified in this section, shall not
require the settlement of strikes, lockouts or other labor difficulties by the
party involved, contrary to such party's wishes, and the resolution of any and
all such difficulties shall be handled entirely within the discretion of the
party concerned. The term "force majeure" as used in this section shall be
defined as and mean any act of God, strike, civil disturbance, terrorism,
lockout or other industrial disturbance, act of the public enemy, war, blockade,
public riot, earthquake, tornado, hurricane, lightning, fire, public
35
demonstration, storm, catastrophe, flood, explosion, governmental action,
governmental delay, restraint or inaction, unavailability of equipment, and any
other cause or event, whether of the type enumerated specifically in this
section or otherwise, which is not reasonably within the control of the party to
this Agreement claiming such suspension.
11.20 Consent to Agreement. By executing this Agreement, each party to this
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Agreement, for himself, herself, or itself, represents such party has read or
caused to be read this Agreement in all particulars, and consents to the rights,
conditions, duties and responsibilities imposed upon such party as specified in
this Agreement. Each party to this Agreement represents, warrants and covenants
that such party executes and delivers this Agreement of such party's own free
will and with no threat, undue influence, menace, coercion or duress, whether
economic or physical. Moreover, each party to this Agreement represents,
warrants, and covenants that such party executes this Agreement acting on such
party's own independent judgment.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed on
the date specified in the preamble of this Agreement.
Aqua Clara Bottling & Distribution, Inc.,
a Colorado corporation
By: /s/ Jack Plunkett
---------------------------
Jack Plunkett
Its: President
BEVsystems International, Ltd.,
a Bermuda corporation
By: /s/ G. Robert Tatum, III
---------------------------
G. Robert Tatum, III
Its: Chief Executive Officer
36
Date of Signature: Names of Sellers:
Dated: 1/15/02 /s/ Life O2 Beverages, LLP
-------------- -------------------------------------
Life O2 Beverages, LLP
Dated: 1/15/02 /s/ Tim Alloway
-------------- -------------------------------------
Tim Alloway
Dated: 1/15/02 /s/ Andrew Babinsky
-------------- -------------------------------------
Andrew Babinsky
Dated: 1/15/02 /s/ Bennie Barton
-------------- -------------------------------------
Bennie Barton
Dated: 1/15/02 /s/ Charles E. Bird
-------------- -------------------------------------
Charles E. Bird
Dated: 1/15/02 /s/ Keith Bish
-------------- -------------------------------------
Keith Bish
Dated: 1/15/02 /s/ Tommy Burns
-------------- -------------------------------------
Tommy Burns
Dated: 1/15/02 /s/ Erlando Che
-------------- -------------------------------------
Erlando Che
Dated: 1/15/02 /s/ Michael Clouse
-------------- -------------------------------------
Michael Clouse
Dated: 1/15/02 /s/ Charles Cochran
-------------- -------------------------------------
Charles Cochran
Dated: 1/15/02 /s/ Don Cohen
-------------- -------------------------------------
Don Cohen
37
Dated: 1/15/02 /s/ Jeff Cohen
-------------- -------------------------------------
Jeff Cohen
Dated: 1/15/02 /s/ Melvin Coles
-------------- -------------------------------------
Melvin Coles
Dated: 1/15/02 /s/ James Dale Davidson
-------------- -------------------------------------
James Dale Davidson
Dated: 1/1/5/02 /s/ Emmanuel Faillettaz
-------------- -------------------------------------
Emmanuel Faillettaz
Dated: 1/15/02 /s/ Mitchell J. Farrell
-------------- -------------------------------------
Mitchell J. Farrell
Dated: 1/15/02 /s/ William Fay Sr.
-------------- -------------------------------------
William Fay Sr.
Dated: 1/15/02 /s/ Dorette Fleischman
-------------- -------------------------------------
Dorette Fleischman
Dated: 1/15/02 /s/ Edward Galto
-------------- -------------------------------------
Edward Galto
Dated: 1/15/02 /s/ Bill Garrison
-------------- -------------------------------------
Bill Garrison
Dated: 1/15/02 /s/ George Gaynor
-------------- -------------------------------------
George Gaynor
Dated: 1/15/02 /s/ William Gunter
-------------- -------------------------------------
William Gunter
Dated: 1/15/02 /s/ Randy Hedrick
-------------- -------------------------------------
Randy Hedrick
Dated: 1/15/02 /s/ Susan Herman
-------------- -------------------------------------
Susan Herman
38
Dated: 1/15/02 /s/ David Holroyd
-------------- -------------------------------------
David Holroyd
Dated: 1/15/02 /s/ Davis Howe
-------------- -------------------------------------
Davis Howe
Dated: 1/15/02 /s/ Anthony Iemma
-------------- -------------------------------------
Anthony Iemma
Dated: 1/15/02 /s/ Punnee Intranuruk
-------------- -------------------------------------
Punnee Intranuruk
Dated: 1/15/02 /s/ Terry Jaramillo
-------------- -------------------------------------
Terry Jaramillo
Dated: 1/15/02 /s/ Michael A. Jervis
-------------- -------------------------------------
Michael A. Jervis
Dated: 1/15/02 /s/ Burt Kaufman
-------------- -------------------------------------
Burt Kaufman
Dated: 1/15/02 /s/ Jack E. Magoulakis
-------------- -------------------------------------
Jack E. Magoulakis
Dated: 1/15/02 /s/ Boris Malden
-------------- -------------------------------------
Boris Malden
Dated: 1/15/02 /s/ Joel Meltzer
-------------- -------------------------------------
Joel Meltzer
Dated: 1/15/02 /s/ Toni Meltzer
-------------- -------------------------------------
Toni Meltzer (with Joel Meltzer)
Dated: 1/15/02 /s/ John Montfort
-------------- -------------------------------------
John Montfort
39
Dated: 1/15/02 /s/ Mike O'Donnell
-------------- -------------------------------------
Mike O'Donnell
Dated: 1/15/02 /s/ Pliny A. Price
-------------- -------------------------------------
Pliny A. Price
Dated: 1/15/02 /s/ Robert Radnoti
-------------- -------------------------------------
Robert Radnoti
Dated: 1/15/02 /s/ Jorge Rodriguez
-------------- -------------------------------------
Jorge Rodriguez
Dated: 1/15/02 /s/ Robert Roule
-------------- -------------------------------------
Robert Roule
Dated: 1/15/02 /s/ Burton Shear
-------------- -------------------------------------
Burton Shear
Dated: 1/15/02 /s/ Dennis P. Smith
-------------- -------------------------------------
Dennis P. Smith
Dated: 1/15/02 /s/ Jane Smith
-------------- -------------------------------------
Jane Smith
Dated: 1/15/02 /s/ Jim Stevens
-------------- -------------------------------------
Jim Stevens
Dated: 1/15/02 /s/ Judy Stevens
-------------- -------------------------------------
Judy Stevens (with Jim Stevens)
Dated: 1/15/02 /s/ G. Robert Tatum III
-------------- -------------------------------------
G. Robert Tatum III
Dated: 1/15/02 /s/ Elaine F. Tatum
-------------- -------------------------------------
Elaine F. Tatum
(with G. Robert Tatum III)
Dated: 1/15/02 /s/ Michelle Mae Tatum
-------------- -------------------------------------
Michelle Mae Tatum
40
Dated: 1/15/02 /s/ Titel Teriba
-------------- -------------------------------------
Titel Teriba
Dated: 1/15/02 /s/ Michael Thompson
-------------- -------------------------------------
Michael Thompson
Dated: 1/15/02 /s/ Kenneth Peter Visser
-------------- -------------------------------------
Kenneth Peter Visser
Dated: 1/15/02 /s/ F. Howard Walsh
-------------- -------------------------------------
F. Howard Walsh
Dated: 1/15/02 /s/ James Ross Whiting
-------------- -------------------------------------
James Ross Whiting
Dated: 1/15/02 /s/ J. Harlan Williams
-------------- -------------------------------------
J. Harlan Williams
Dated: 1/15/02 /s/ Jaroslaw Zaremba
-------------- -------------------------------------
Jaroslaw Zaremba
Dated: 1/15/02 /s/ Jeffery Zimmerman
-------------- -------------------------------------
Jeffery Zimmerman
41