<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998
REGISTRATION NO.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VENTURI TECHNOLOGIES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 7217 86-0853635
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification No.)
of Incorporation or Organization) Classification Code Number)
</TABLE>
1327 NORTH STATE
OREM, UTAH 84057
(801) 235-9552
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
MR. GAYLORD KARREN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
1327 NORTH STATE
OREM, UTAH 84057
(801) 235-9552
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
RANDY K. JOHNSON, ESQ.
MACKEY PRICE & WILLIAMS
170 SOUTH MAIN STREET, SUITE 900
SALT LAKE CITY, UT 84101-1655
(801) 575-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM PROPOSED REGISTRATION
OF SECURITIES TO REGISTERED OFFERING PRICE AGGREGATE FEE
BE REGISTERED PER SHARE OFFERING
<S> <C> <C> <C> <C>
Common Stock....... 1,954,862 $3.125 $6,108,943.75 $1,799.50
========= ======= ============= =========
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of Regulation C promulgated under the Securities Act of
1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
VENTURI TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION PROSPECTUS HEADING
- ----------------------- ------------------
<S> <C>
1. Front of Registration Statement and Forepart of Registration Statement and
Outside Front Cover of Prospectus Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors Prospectus Summary and Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Risk Factors and Plan of Distribution
6. Dilution Dilution
7. Selling Security Holders Converting Stockholders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons Management and Principal Stockholders
11. Security Ownership of Certain Beneficial
Owners and Management Management and Principal Stockholders
12. Description of Securities to be Registered Description of Securities
13. Interest of Named Experts and Counsel Not Applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities
15. Organization Within Last Five Years Venturi's Business
16. Description of Business Venturi's Business
17. Management's Discussion and Analysis Management's Discussion and Analysis
18. Description of Property Venturi's Business
19. Certain Relationships and Related Certain Relationships and Related
Transactions Transactions
20. Market for Common Stock
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure Not Applicable
</TABLE>
INFORMATION IN THIS PROSPECTUS MAY BE CHANGED OR AMENDED. A REGISTRATION
STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DATED JULY 31, 1998
<PAGE> 3
1,954,862 SHARES OF COMMON STOCK
VENTURI TECHNOLOGIES, INC.
a corporation providing carpet cleaning and flood restoration
services using proprietary technology
Logo/registered mark/picture
Of the 1,954,862 shares of Common Stock, par value .001 per share, of Venturi
Technologies, Inc., 32,000 shares are being offered by Venturi Technologies,
Inc., and 1,922,862 shares are being registered for distribution to certain
stockholders (the "Converting Stockholders") in exchange for conversion of their
preferred stock. See "Principal and Converting Stockholders." See "Description
of Securities." There will be no proceeds to Venturi or the Converting
Stockholders from the issuance of the shares of Common Stock to the Converting
Stockholders.
The shares are being offered on a best efforts basis by Venturi's officers and
directors (who will not be paid for such services). Venturi reserves the right
to use selling agents. Persons who wish to purchase Common Stock in this
offering must submit a check for the required payment to Venturi. See "Plan of
Distribution."
The Common Stock is quoted on the NASDAQ OTC Bulletin Board under the trading
symbol "VTIX". On July 23, 1998, the last sale price per share of the Common
Stock as reported on the Bulletin Board was $3.125. See "Price Range for Common
Stock." The public offering price is based upon the quoted price of the Common
Stock as of a date not more than five (5) days prior to commencement of this
offering.
There has not been an active market for the Common Stock prior to this offering,
and there can be no assurance that an active market will develop by reason of
this offering. See "Risk Factors."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION FROM THE OFFERING PRICE. SEE "RISK FACTORS" AND "DILUTION."
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC (1) COMPANY (2)
<S> <C> <C> <C>
Per Share....... $ $-0- $
- ---- -
Total .......... $ $-0- $
= ==== =
</TABLE>
This offering will terminate not later than October 1, 1998 (the "Termination
Date"), except that Venturi may extend the offering period for an additional
period not to exceed 90 days.
THE DATE OF THIS PROSPECTUS IS JULY 31, 1998
<PAGE> 4
Footnotes to Cover Page
(1) Common Stock is being offered for sale at $__________ per share. Payment in
full for the shares is due upon subscription. See "Common Stock Purchase
Information" and "Plan of Distribution."
(2) Proceeds to Venturi are calculated on the assumption that all Common Stock
offered hereby will be sold, and before the deduction of expenses in connection
with this offering and payable by Venturi, which are estimated to be
$100,000.00, and include filing, legal, accounting, printing and other
miscellaneous fees.
<PAGE> 5
(INSIDE FRONT COVER)
(Appearing on the inside front cover of the Prospectus will be a montage of
color pictures of Venturi's trucks and/or cleaning personnel.)
<PAGE> 6
PROSPECTUS SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. Venturi's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following information is selective and qualified in its entirety by the
detailed information appearing elsewhere in this Prospectus. This summary of
certain provisions of the Prospectus is intended only for convenient reference
and is not complete. The entire Prospectus should be read and carefully
considered by prospective investors before making a decision to purchase Common
Stock.
COMMON STOCK PURCHASE INFORMATION
Those wishing to purchase shares of Common Stock should make checks payable to
Venturi Technologies, Inc., and mail them to Venturi's executive office: 1327
North State, Orem, Utah 84057, Attn: Joe Fox, Shareholder Relations Coordinator,
telephone (801) 235-9552 and facsimile (801) 235-1731.
VENTURI Venturi Technologies, Inc. is a Nevada corporation, incorporated
on January 30, 1997. Venturi provides carpet cleaning and fire
and flood restoration services using proprietary technology known
as VenturiClean(TM). Venturi presently operates in Texas and
Utah. Venturi plans to expand its operations to other states
through acquisitions, until VenturiClean(TM) is in use throughout
the United States.
CAPITAL Venturi is authorized to issue 20,000,000 shares of $.001 par
value Common Stock, and 5,000,000 shares of $.001 par value
Preferred Stock. As of June 30, 1998 there were 4,752,804 shares
of Common Stock outstanding, and 697,272 shares of Preferred
Stock outstanding.
OFFICES Venturi's principal executive offices are located at 1327 North
State, Orem, Utah 84057; and its telephone number is (801)
235-9552.
RISK FACTORS An investment in the Common Stock involves a high degree of risk.
Venturi cannot guarantee that it will have substantial sales or
revenues or that it will be able to sell its services at a
profit. See the "Risk Factors" section which begins on page 2.
THE OFFERING 32,000 (subject to change) shares of Common Stock are being
offered by Venturi
Price per share: $
4,752,804 shares of Common Stock were outstanding as of June 30,
1998
6,707,666 shares of Common Stock will be outstanding if all
shares offered are converted and sold
CONVERTING Venturi is also issuing 1,922,862 shares of Common Stock to
STOCKHOLDERS certain Preferred Stockholders in exchange for surrender and
cancellation of their Preferred Stock
<PAGE> 7
USE OF PROCEEDS Venturi will use the proceeds of the Offering to pay the
expenses of the Offering and if any proceeds remain, to
provide working capital for general corporate purposes.
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The information set forth below has been selected from Venturi's Financial
Statements, and is not complete. This information should be read in conjunction
with, and is qualified in its entirety by reference to, the financial
statements, including the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
1996 1997 (Unaudited) June 30
---- ---- --------------------
1997 1998
---- ----
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues $ 1,998 $ 2,161 $ 1,080 $ 2,202
Income (Loss) from operations (1,211) (3,162) 212 (1,198)
Net income (Loss) (1,148) (3,162) (1,581) (1,198)
Net income per Share (.49) (.79) (.40) (.25)
Weighted average number of
Shares outstanding 2,342 4,069 3,929 4,753
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997 1997 1998
Actual Actual (Unaudited)
------ ------------------
<S> <C> <C> <C> <C>
(Unaudited)
- -----------
BALANCE SHEET DATA:
Total assets $ 973 $ 995 $ 998 $ 1,874
Long-term debt 1,241 1,284 925 1,604
Stockholders' equity (731) (1,156) (1,088) (341)
</TABLE>
RISK FACTORS
An investment in Venturi Common Stock involves a high degree of risk and is not
an appropriate investment for persons who cannot afford to lose their entire
investment. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing any of the Common Stock.
2
<PAGE> 8
PROJECTIONS This Prospectus contains information, such as projections,
future expectations and other "forward-looking" statements
within the meaning of Section 27A of the Securities Act of
1933. This information and statements represent Venturi's
objectives, expectations or beliefs. Generally, you can
identify such statements by use of the words may, will,
expect, believe, anticipate, intend, estimate, continue or
similar phrases. Those statements are subject to known and
unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those
contemplated by the statements.
LIMITED OPERATING Venturi has a limited operating history upon which to
HISTORY base an evaluation of its prospects. Venturi's prospects must
be considered in light of the risks, expenses and
difficulties frequently encountered by companies in the early
stages of development. These risks include inability to
sustain profit margins, to achieve expected growth levels, to
attract sufficient capital for acquisitions and equipment
purchases, and lack of experience in managing growth.
ACCUMULATED Venturi has operated at a loss since its formation. As of
LOSSES December 31, 1997, Venturi had an accumulated deficit of
$4,801,971. Venturi incurred a net loss of approximately
$3,162,453 and had negative cash flows from operations during
the year ended December 31, 1997. These results raise
substantial doubt as to Venturi's ability to continue in
existence. Management's plans in regard to these matters are
described in "Management's Discussion and Analysis."
RISKS ASSOCIATED Because Venturi has been in existence for a short period of
WITH IMPLEMENTING time, it is difficult to accurately forecast its revenues.
VENTURI'S BUSINESS Venturi's current and estimated future expense levels are
STRATEGY based largely on its estimates of future revenues. If
revenues are not as anticipated, Venturi may be unable to
adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Any significant shortfall in
revenues in relation to Venturi's planned expenditures could
have an immediate adverse effect on its business, prospects,
financial condition and results of operations. Implementation
of Venturi's business strategy is subject to risks and
uncertainties, some of which Venturi can control and others
of which it cannot control. In addition, certain elements
of Venturi's business strategy, notably acquisition of local
carpet cleaning companies, could result in significant
expenditures of cash and management resources. Finally,
implementation of Venturi's business strategy is subject to
risks associated with market and competitive conditions.
3
<PAGE> 9
RISKS ASSOCIATED Venturi has completed a number of acquisitions since 1995,
WITH ACQUISITIONS and expects to pursue additional acquisitions in the future
as a key component of its business strategy. Venturi cannot
guarantee that attractive acquisition opportunities will be
available or that it will be able to consummate or obtain the
financing to consummate any future acquisitions. Venturi also
cannot guarantee that any acquisitions which are consummated
will prove to be successful. Acquisitions involve many risks,
including the risk that the acquired business will not
perform in accordance with expectations, difficulties in
integrating the operations of the acquired business with
Venturi's business, the diversion of management's attention
from other aspects of Venturi's business, the risks
associated with entering geographic markets in which Venturi
has limited or no direct prior experience and the potential
loss of key employees of the acquired business. The
acquisition of another business can also subject Venturi to
liabilities and claims arising out of such business. In
addition, future acquisitions would likely require additional
financing, which could result in an increase in Venturi's
debt or the issuance of additional capital stock which could
dilute the holdings of other stockholders.
DEPENDENCE UPON Venturi's success is heavily dependent upon the continued
KEY PERSONNEL active participation of its current executive officers, key
employees and consultants, particularly Gaylord Karren and
John Hopkins. Loss of the services of one of these
executives, employees or consultants could have a material
adverse effect upon the development of Venturi's business.
Venturi has no employment agreement with Mr. Karren or Mr.
Hopkins; however it does maintain "key man" life insurance on
their lives. Venturi does not have employment contracts with
or life insurance on any other officers or employees. Venturi
cannot guarantee that it will be able to recruit or retain
other qualified personnel should this become necessary.
Venturi's failure to retain and attract the necessary
technical, managerial, marketing and customer service
personnel could have a material adverse effect on Venturi's
business, prospects, financial condition and results of
operations. See "Management."
COMPETITION Some of Venturi's current and potential competitors have
longer operating histories, larger customer bases, greater
brand name recognition and significantly greater financial,
marketing and other resources. In responding to changes in
the competitive environment, Venturi may make decisions or
acquisitions that could have a material adverse effect on its
business, prospects, financial condition and results of
operations. New technologies and the expansion of existing
4
<PAGE> 10
technologies may increase the competitive pressures on
Venturi. See "Description of Business-Competition."
RELIANCE ON THIRD Venturi relies upon third parties to manufacture certain
PARTIES FOR equipment used in its business. If any one of the
EQUIPMENT manufacturers was unable or unwilling to continue
manufacturing and selling the necessary equipment, Venturi's
business, results of operations and financial condition would
be materially adversely affected. Venturi does not maintain
business interruption insurance.
MANAGEMENT OF
POTENTIAL GROWTH Venturi has expanded its operations very quickly, and expects
that further expansion will be required to exploit the
potential for growth and consolidation in the carpet cleaning
industry. This expansion has placed, and will continue to
place, a significant strain on Venturi's management,
operations and financial resources. To manage its expected
growth, Venturi must improve existing, and implement new,
transaction-processing, operational and financial systems,
procedures and controls, and expand, train and manage its
already growing employee base. Venturi also may be required
to expand its finance, administrative and operations staff.
Venturi cannot guarantee that its current and planned
personnel, systems, procedures and controls will be adequate
to support future operations, or that management will be able
to successfully identify, manage and exploit existing and
potential market opportunities. If Venturi cannot manage
growth effectively, its business, prospects, financial
condition and results and operations would be hurt. See
"Management's Discussion and Analysis."
LIMITED PROTECTION Venturi regards its service mark and related technology as
OF INTELLECTUAL proprietary and relies on a combination of copyright,
PROPERTY AND trademark, trade secret and confidential information laws as
PROPRIETARY RIGHTS well as employee and third-party nondisclosure agreements to
protect its proprietary rights. Venturi has applied for
patents covering certain aspects of the design of its
cleaning equipment and the solutions used. Venturi has
received a notice of allowance of patent with respect to one
application; the other remains pending. Venturi cannot
guarantee that any additional patents will actually be
issued, or that Venturi will become entitled to the
protections afforded by the federal patent laws. Venturi also
cannot guarantee that these protections will be adequate to
protect against technologies that are equivalent or superior
to its technologies. Venturi cannot guarantee that its
competitors or others will not develop superior technologies
to which Venturi would not have access.
5
<PAGE> 11
DEPENDENCE ON Venturi's success will depend in part on its ability to
TRADEMARKS, obtain and preserve its patents and trademarks and to operate
PATENTS AND without infringing the proprietary rights of third parties.
PROPRIETARY Venturi cannot guarantee that its patent and trademark
RIGHTS; NO applications will provide a competitive advantage or afford
ASSURANCE OF protection against competitors with processes or services
ENFORCEABILITY similar to those offered by Venturi. Venturi cannot guarantee
that its competitors will not circumvent, or challenge the
validity of those patents and trademarks. In addition, in the
event that another party infringes Venturi's patents or
trademarks, the enforcement of such rights is optional and
can be a lengthy and costly process, with no guarantee of
success. Finally, although to date no claims have been
brought against Venturi alleging that its patents, trademarks
or other proprietary information infringes intellectual
property rights of others, there is no guarantee that such
claims will not be brought in the future or that any such
claims would not be successful. If such a claim were
successful, Venturi's business could be materially adversely
affected. In addition to any potential monetary liability for
damages, Venturi could be required to obtain a license to use
the trademarks or technology found to be infringing or could
be enjoined from utilizing its trademarks and technology if
such a license were not made available on acceptable terms.
See "Business--Raw Materials; Patents; Licenses; Trademarks
and Service Marks."
LACK OF CLINICAL There are no long term studies of the health or other effects
STUDIES of sustained exposure to carpet or other materials treated
with the cleaning and other solutions used by Venturi.
Venturi depends upon consumers' perception of the safety and
quality of its services and processes. Although Venturi does
not believe its cleaning and other solutions pose any
potential health hazards, if this belief is mistaken, Venturi
could face possible liability for any damage or injury caused
to individuals exposed to its cleaning and other solutions.
Such potential liability and any adverse harmful effects
would have a severely adverse impact on Venturi. Venturi does
not maintain products liability insurance.
NO DIVIDENDS ON Venturi has never paid any dividends on its Common Stock and,
COMMON STOCK because of its present financial condition and cash flow
ANTICIPATED requirements, does not expect to pay any dividends on its
Common Stock in the foreseeable future. Therefore, potential
purchasers should not buy the Common Stock if they expect
to receive dividend payments. See "Dividend Policy."
SHARES AVAILABLE Sales of substantial numbers of shares of Common Stock in the
FOR RESALE public market following this Offering could adversely affect
the market price
6
<PAGE> 12
of the Common Stock prevailing from time to time. Upon
completion of this Offering, and assuming that all shares
offered hereby have been sold or converted, Venturi will have
6,707,666 shares of Common Stock outstanding. 2,026,000
shares of the Common Stock outstanding (including all of the
Common Stock sold in this offering) will be freely
transferable without restriction or further registration
under the Securities Act. Venturi cannot estimate when or how
many shares of Common Stock may be sold by existing
stockholders because such sales will depend upon the market
price for the Common Stock, the personal circumstances of the
seller and other factors. The future sales of Common Stock or
the availability of such shares of Common Stock for sale may
have an adverse effect on the market price of the Common
Stock prevailing from time to time. If future sales did
adversely affect the market price of the Common Stock,
Venturi's ability to raise additional funds through an equity
offering at such time could be adversely affected. See
"Principal Stockholders" and "Shares Eligible for Future
Sale."
DILUTION Present stockholders acquired their shares of Common Stock at
an average cost of approximately $.31 per share, an amount
substantially less than the assumed public offering price of
$3.125 per share. As of June 30, 1998 Venturi's net tangible
book value, without giving effect to any outstanding warrants
or options, was ($341,197) or ($.07) per share and will
remain effectively the same ($341,197), or ($.07) per share
if all the shares of Common Stock offered by Venturi are
sold. The result will be an immediate and substantial
dilution of the net tangible book value of the shares of
Common Stock acquired by the public investors of $3.20 (102%)
per share if all shares of Common Stock offered hereby are
sold. Public investors therefore will bear most of the risk
of loss, while control of Venturi will remain in the hands of
the present management and stockholders. See "Dilution."
INDEMNIFICATION OF Venturi's Articles of Incorporation and Bylaws require or
OFFICERS AND permit it to indemnify and hold harmless its directors and
DIRECTORS officers from and against and in respect of certain losses,
damages, deficiencies, expenses or costs which may be
incurred or suffered by such directors and officers as a
result of their serving in such capacities with Venturi. See
"Certain Provisions of Nevada Law and of Venturi's Articles
of Incorporation and Bylaws."
ABSENCE OF ACTIVE Prior to this Offering, there has been no active market for
MARKET; POSSIBLE the Common Stock, although the Common Stock is quoted on the
OTC Bulletin Board. Venturi cannot guarantee that an active
trading market for the
7
<PAGE> 13
VOLATILITY OF PRICE
OF COMMON STOCK Common Stock will develop. The trading price of Common Stock
could be subject to wide fluctuations in response to such
factors as, among others, variations in anticipated or actual
results of operations and market conditions.
RISK OF LOW-PRICE Since Venturi's securities are not quoted on the NASDAQ
STOCKS SmallCap Market, they could become subject to Rule 15g-9
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). That Rule imposes additional sales practice
requirements on broker-dealers who sell such securities to
persons other than established customers and "accredited
investors" (generally, individuals with net worth in excess
of $1,000,000 or annual income exceeding $200,000, or
$300,000 together with their spouses). For transactions
covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received
the purchaser's written consent to the transaction prior to
sale. Consequently, the rule may adversely affect the ability
of broker-dealers to sell the Common Stock.
Securities and Exchange Commission regulations define a
"penny stock" to be any non-NASDAQ equity security that has a
market price of less than $5.00 per share or with an exercise
price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any
transaction in a penny stock, of a disclosure schedule
prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about
commissions payable to both the broker-dealer and the
registered representative and current quotations for the
securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock
held in the account and information on the limited market in
penny stocks.
The foregoing required penny stock restrictions will not
apply to Venturi's securities if they are included on the
NASDAQ SmallCap Market and have certain price and volume
information provided on a current and continuing basis or
meet certain public float minimum net tangible asset and
revenue criteria. Venturi cannot guarantee that the Common
Stock will qualify for exemption from these restrictions. If
the Common Stock is subject to the rules on penny stocks, the
market liquidity for the Common Stock could be severely
adversely affected.
LACK OF A MAJORITY Upon completion of the Offering, Venturi's board of directors
OF INDEPENDENT will have no independent directors. As such, upon completion
DIRECTORS of the Offering, the majority of its directors will be either
officers, persons related to the
8
<PAGE> 14
officers, or persons appointed by the Series B Preferred
Stock holders. See "Management."
GOVERNMENT Venturi is subject to regulation under various state and
REGULATION local laws which include provisions regulating, among other
things, telemarketing operations. Venturi cannot predict
whether new domestic or foreign legislation regulating its
activities will be enacted, or what effect it might have. See
"Business--Government Regulation."
CONCENTRATION OF After this Offering, Venturi's directors and all executive
OWNERSHIP; CERTAIN officers will beneficially own approximately 41.7% of the
ANTI-TAKEOVER outstanding Common Stock. Accordingly, these stockholders
CONSIDERATIONS will continue to have the ability to elect all of Venturi's
directors and thereby direct or substantially influence the
management, policies and business operations of Venturi and
will have the power to control the outcome of any matters
submitted to a vote of Venturi's stockholders. Venturi's
Board of Directors has the authority to approve the issuance
of 5,000,000 shares of preferred stock and to fix the rights,
preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by
the stockholders. The rights of the Common Stock holders will
be subject to, and may be adversely affected by, the rights
of holders of any preferred stock that may be issued in the
future. Certain provisions of Nevada law, as well as the
issuance of preferred stock, could delay or inhibit the
removal of incumbent directors and could delay, defer, make
more difficult or prevent a merger, tender offer or proxy
contest, or any change in control involving Venturi, as well
as the removal of management, even if such events would be
beneficial to the interests of the stockholders, and may
limit the price certain investors may be willing to pay in
the future for shares of Common Stock.
ABSENCE OF LEGAL Venturi has consummated a number of acquisitions over the
COUNSEL IN course of the past four years. Venturi was not represented by
ACQUISITIONS counsel in connection with those transactions, and did not
obtain legal review or advice with respect to the tax
consequences, the pendency of liens, the issuance of stock or
any other material aspects of those transactions. Venturi is
involved in litigation with respect to an acquisition of
three related businesses. Venturi cannot guarantee that its
failure to obtain legal advice will not lead to additional
litigation or operational issues in the future.
YEAR 2000 RISK Venturi began computer automation in 1997. Its systems
consist primarily of stand-alone personal computers. Venturi
has reviewed its
9
<PAGE> 15
computer programs and systems and believes that its programs
and systems will function properly and be in compliance for
the year 2000. If any future modifications are necessary,
management does not believe that the costs to modify its
programs or systems will be material to its financial
condition or results of operations. Venturi cannot guarantee
that such costs will be nominal. Because most of Venturi's
customers are individuals, Venturi does not believe the year
2000 problem will have a material impact on its customers.
However, Venturi cannot guarantee that the effect of the year
2000 problem on individuals and other entities with whom
Venturi does business will not have a material adverse effect
on Venturi's business, financial condition or results of
operations.
USE OF PROCEEDS
After deducting the Offering expenses, it is not expected that there will be any
net proceeds to Venturi from the sale of the Common Stock. Venturi will not
receive any proceeds in connection with the conversion of the Preferred Stock to
Common Stock by the Converting Stockholders in the Offering. The proceeds of the
Offering will be available to Venturi immediately upon payment from subscribers,
and will be used primarily to pay the Offering expenses. The following table
sets forth the estimated application by Venturi of the net proceeds to be
derived from the sale of Common Stock offered hereby.
<TABLE>
<S> <C>
Total Proceeds to Company $100,000
Less Offering Expenses:
Legal and Accounting 80,000
Printing and Advertising 10,000
Filing Fees 5,000
Miscellaneous 5,000
Net Proceeds to Company $ -0-
</TABLE>
If the Offering expenses are less than anticipated, any excess will be used for
general working capital purposes, to support the basic operations of Venturi,
including but not limited to funds for office rent, utilities, salaries and
miscellaneous expenses.
DETERMINATION OF OFFERING PRICE
The offering price of the Common Stock was determined by reference to its last
quoted price as of a date not more than five (5) days prior to commencement of
the offering, if available.
10
<PAGE> 16
DIVIDEND POLICY
Venturi has never paid or declared any cash dividends on its Common Stock and
does not intend to pay dividends on its Common Stock in the foreseeable future.
Venturi presently expects to retain its earnings to finance the development and
expansion of its business. The payment by Venturi of dividends, if any, on its
Common Stock in the future is subject to the discretion of the Board of
Directors and will depend on Venturi's earnings, financial condition, capital
requirements and other relevant factors. See "Description of Securities."
DILUTION
As of June 30, 1998, there were 4,752,804 shares of Common Stock outstanding,
having a net tangible book value of ($341,197) or approximately ($.07) per
share. Net tangible book value per share is the net tangible assets of Venturi
(total assets less total liabilities and intangible assets) divided by the
number of shares of Common Stock outstanding. Upon completion of this Offering,
there will be 6,707,666 shares of Common Stock outstanding having a net tangible
book value of approximately ($341,197) or approximately ($.07) per share if all
the Common Stock offered is sold. The net tangible book value of each share will
remain effectively the same ($.07) per share to present stockholders, and
decrease by approximately ($3.20) per share (a dilution of 102%) to public
investors, assuming that all of the Common Stock offered is sold at a price of
$3.125 per share.
The following tables set forth the percentage of equity to be purchased by
public investors in this Offering compared to the percentage of equity to be
owned by the present stockholders, and the comparative amounts paid for the
shares of Common Stock by public investors as compared to the total cash
consideration paid by the present stockholders of Venturi.
ASSUMING ALL SHARES OFFERED ARE SOLD
<TABLE>
<CAPTION>
Shares Purchased Total Cash Consideration Average Price
---------------------- ------------------------ -------------
Number Percent Amount Percent Per Share (1)
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Common
Stockholders 4,752,804 71% $1,473,834 94% $ .31
Series B Conversion 1,550,000 23% -0- 0% $ .00
Series C Conversion 372,862 6% -0- 0% $ .00
New Investors 32,000 *% $ 100,000 6% $3.125
TOTAL 8,562,942 100% $1,573,834 100%
=====
</TABLE>
* Less than 1%
(1) Based on the average value per share paid by present stockholders and an
assumed public offering price of $3.125 per share of Common Stock to be paid by
public investors.
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<PAGE> 17
There will be no cash paid in connection with the conversion of the Series B and
Series C Preferred Stock.
Venturi has reserved an aggregate of 2,000,000 shares of its Common Stock for
its officers, directors, employees and consultants to purchase pursuant to its
Dual Stock Option Plan. As of June 30, 1998, Venturi had issued 400,000
nonqualified stock options to its Chief Financial Officer, and 208,000
nonqualified stock options to its Chief Executive Officer and its President, all
at a strike price of $.01 per share; and 570,007 incentive stock options to
other employees at a strike price of $2.40;. The above table does not give
effect to the possible issuance of up to 1,078,007 additional shares of Common
Stock upon exercise of any options which have been granted under the Plan. The
issuance of shares of Common Stock upon the exercise of options which may be
granted under the Stock Option Plans would result in further dilution in the
interests of stockholders, if at the time of exercise, Venturi's net tangible
book value per share is greater than the exercise price of any such options. See
"Stock Option Plan."
Additional options to acquire 100,000 shares of Common Stock have been issued to
the holders of the Series B Preferred Stock. The above table does not reflect
the possible issuance of additional Common Stock upon exercise of those options.
The issuance of additional Common Stock upon exercise of these options would
result in further dilution.
As of June 30, 1998, Venturi has outstanding 677,269 warrants to acquire Common
Stock. Warrants to acquire 64,410 shares of Common Stock are held by the Series
A Preferred Stockholders; warrants to acquire 5,000 shares of Common Stock are
held by Dominion Capital, and were issued in consideration of the placement of
the Series A Preferred Stock. These warrants are exercisable at $5.00 per share.
Warrants to acquire 83,333 shares of Common Stock were issued to Sentry
Financial and are exercisable at a price of $2.40 per share. Warrants to acquire
135,706 shares of Common Stock were issued in connection with a private
placement of Common Stock in June 1997, and are exercisable at a price of $6.00.
Warrants to acquire 388,820 shares of Common Stock were issued to Northstar
Capital, LLC, and were issued in consideration for Northstar's agreement to
arrange lease financing for Venturi. These warrants are exercisable at a price
of $.50 per share. The above table does not reflect the possible issuance of
additional Common Stock upon exercise of the warrants referred to above. The
issuance of additional Common Stock upon exercise of these warrants would result
in further dilution.
CAPITALIZATION
The following tables set forth at June 30, 1998 (i) the actual capitalization of
Venturi and (ii) the capitalization as adjusted to reflect the sale of the all
shares of Common Stock offered hereby (based upon an initial public offering
price of $3.125 per Share and the application of the net proceeds therefrom).
The table should be read in conjunction with the Financial Statements and Notes
thereto included elsewhere in this Prospectus.
12
<PAGE> 18
<TABLE>
<CAPTION>
JUNE 30, 1998
Prior to Offering Actual(1) As Adjusted(2)
- ----------------- --------- --------------
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Stockholders' equity:
Common Stock, $.001 par value, $ 4,753 $ 6,708
20,000,000 shares authorized;
4,752,804 shares outstanding
Additional paid-in-capital 4,233,543 4,332,219
Preferred Stock, $.001 par value,
5000,000 shares authorized;
64,410 Series A, 260,000 Series B and
372,862 Series C 696 64
Offering expenses 100,000 100,000
Retained Earnings (4,580,188) (4,680,188)
Total capitalization (341,197) (341,197)
==================== =========== ===========
</TABLE>
(1) Derived from Venturi's Financial Statements, which are included elsewhere in
this Prospectus.
(2) As adjusted to reflect the application of the net proceeds as set forth in
"Use of Proceeds", and to reflect the change in outstanding Common Stock as a
result of this Offering, as follows: 6,707,666 shares of Common Stock
outstanding, 64,410 shares of Series A Preferred Stock, and no shares of Series
B Preferred or Series C Preferred. The table does not include outstanding
options and warrants to acquire Common Stock. See "Dilution."
SELECTED FINANCIAL DATA
The statement of operations and balance sheet information set forth below for
the years ended December 31, 1996 and 1997, are derived from, and are qualified
by reference to Venturi's financial statements which have been audited by Child
& Company, independent certified public accountants. The financial statements as
of December 31, 1997, and the report thereon, are included elsewhere in this
Prospectus. The selected data for the six months ended June 30, 1998 are derived
from Venturi's unaudited financial statements, and in the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of such data have been included. The information below should
be read in conjunction with the consolidated Financial Statements and Notes
thereto included in this Prospectus. Venturi's historical operating results are
not necessarily indicative of the results of any future period.
13
<PAGE> 19
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended Six Months June 30
1996 1997 1997 1998
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Income Statement Data:
Net Sales $ 1,998 $ 2,161 $ 1,080 $ 2,202
Gross Profit
Operating income (loss) (1,211) (3,162) 212 (1,198)
Other income (expenses), net 62
Income before taxes (1,148) (3,162) (1,581) (1,198)
Net income (1,148) (3,162) (1,581) (1,198)
Net income per share (.49) (.79) (.40) (.25)
Weighted average shares
outstanding 2,341,962 4,068,784 3,928,976 4,752,804
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997 1997 1998
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $ 973 $ 995 $ 998 $ 1,874
Long-term debt 1,241 1,284 925 1,604
Stockholders' equity (731) (1,156) (1,088) (341)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Venturi's financial
statements and the other financial information appearing elsewhere herein.
Venturi was formed in 1997, but has operational and financial data from prior
periods as a result of the operations of its predecessor, which was formed in
1994. That company is now a wholly owned subsidiary of Venturi. See "Venturi's
Business-History and Development." Venturi's management has formulated a
strategy that calls for it to consolidate the fragmented carpet cleaning
industry by purchasing companies operating in particular locations, and
converting the acquired companies to use of Venturi's proprietary processes.
Venturi's historic operations have consisted of revenues from carpet cleaning
and fire and flood restoration in the areas of Orem, Utah, and Fort
Worth/Dallas, Houston and Austin, Texas, utilizing a proprietary technology and
process. The primary costs of operating Venturi's business are the trucks and
vans used to
14
<PAGE> 20
house the cleaning equipment, labor and cleaning equipment and supplies. See
"Venturi's Business-- Purchasing of Raw Materials."
SIX MONTHS ENDED JUNE 30, 1998
REVENUES. Revenues increased by 104% to $2,201,818 for the period ending June
30, 1998 compared to $1,080,281 for the period ending June 30, 1997, due to the
completion of four acquisitions, marketing penetration in existing base
locations, newer and more reliable equipment, and available funding.
OPERATING EXPENSES. Operating expenses totaled $3,400,149 for the period ending
June 30, 1998, an increase of 28% from $2,661,000 for the period ending June 30,
1997. The increase in operating expenses was attributable to costs incurred to
increase staff to permit the 104% increase in revenues over the same period.
LOSSES FROM OPERATIONS. Losses from operations decreased to ($1,198,331) for the
period ending June 30, 1998 as compared to ($1,581,256) for the period ending
June 30, 1997. The decrease of 24 % reflects economies of scale.
LIQUIDITY AND CAPITAL RESOURCES. At June 30, 1998, Venturi had cash balances
totaling $93,597 and a working capital balance of $294,725. This compares to a
cash balance of $7,379 and working capital of $97,264 as of December 31, 1997.
Venturi's primary liquidity needs are $1,400,000 to cover corporate overhead
through December 31, 1998; $3,000,000 is available to fund truck and equipment
purchases. Historically, Venturi has funded its operations through operating
profit, bank borrowings, and the sale of stock.
Venturi's accounts receivable increased 181 % to $201,128 for the period ending
June 30, 1998 compared to $71,628 from the period ending December 31, 1997. The
increase in accounts receivable was attributable to increased revenues primarily
from sales to multi-family housing complexes and from new disaster restoration
customers.
At June 30, 1998, Venturi's capital resources consisted of bank credit lines,
private equity funding, equipment leases and cash on hand.
Venturi will need additional financing to meet its anticipated working capital
requirements for at least the next twelve months.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES. Revenues increased by 8.1% to $2,160,562 for the year ended December
31, 1997 compared to $1,998,335 for the year ended December 31, 1996. This
nominal increase in sales was attributable to staff's efforts to arrange
financing and develop procedures and technology to accommodate future
acquisitions.
15
<PAGE> 21
OPERATING EXPENSES. Operating expenses totaled $5,323,015 for the year ended
December 31, 1997 an increase of 62.5% from $3,275,652 for the year ended
December 31, 1996. The increase in operating expenses during the current year
was primarily attributable to the cost of hiring additional staff to accommodate
future acquisitions and expansion. In addition, there was a charge to earnings
of approximately $1,396,000 for employee stock incentive programs.
LOSSES FROM OPERATIONS. Losses from operations increased to ($3,162,453) for the
year ended December 31, 1997 a 148% increase from the ($1,210,780) for the
corresponding period of the prior year. This increase was a result of flat sales
and increased staffing costs to prepare for future acquisitions, including the
stock incentives mentioned above.
SEASONALITY
Venturi's business varies little from season to season, although it does
experience slightly higher revenues in summer.
INFLATION
Inflation historically has not had a material effect on Venturi's operations.
When the price of raw materials has increased, the costs have been built into
the pricing structure. Venturi does not have either long-term supply contracts
or long-term contracts with customers. Prices are determined centrally, and are
quoted based on the prevailing market trends. Accordingly, Venturi does not
believe inflation will have a material effect on its future operations.
PLAN OF OPERATION
Venturi intends to enter new markets through acquisitions. Initially, Venturi
intends to focus on acquisitions in the southern and western United States. The
acquired companies will then be converted and trained in the use of
VenturiClean(TM). The next target markets for Venturi are California, Nevada and
Arizona. In selecting a new market, Venturi's primary goal is to identify a
market that has the potential to produce $100,000 in monthly revenues within six
months after consummation of the acquisition. Venturi looks for the following
attributes in acquisition candidates: five years successful operations within
the market; favorable financial condition; reputation for quality service and
integrity; quality management dedicated to aggressive growth; willingness to
accept stock in exchange for assets; and annual revenue in excess of $250,000.
Where possible, Venturi seeks to acquire market leaders or those businesses with
the largest market share. Venturi has begun to receive regular inquiries from
other companies in the industries desiring to have access to the
VenturiClean(TM) and to become part of a larger organization.
Venturi has completed several acquisitions since January 1, 1998, and has signed
letters of intent for consummation of two additional acquisitions. See
"Venturi's Business--History and Development of Venturi."
16
<PAGE> 22
As of June 30, 1998, Venturi had approximately 21 carpet cleaning and
restoration trucks in operation. These trucks generated approximately $274,979
in revenues for the month of June, 1998, an average of $12,637 per truck per
month. These revenue figures are better than anticipated by Venturi's
management, which based its projections of future operations on the assumption
that each truck would generate approximately $10,300 per month. Of course,
Venturi cannot guarantee that its trucks will be able to continue to generate
revenue at this level. Past performance is not a guarantee of future
performance.
VENTURI'S BUSINESS
Venturi provides carpet cleaning and fire and flood restoration services to its
customers through locations in Texas and Utah. Venturi is vertically integrated,
and manufactures certain of the components used in its proprietary carpet
cleaning equipment, including a flash heater, modulator box and cyclonic return
system. Venturi's headquarters is located in Orem, Utah.
Venturi has developed a proprietary system for carpet cleaning, known as
VenturiClean(TM). It consists of four unique components. See "Purchasing of Raw
Materials; Patents; Licenses; Trademarks and Service Marks." The first is the
use of electromagnetic oxidizing water ("EO water"), which Venturi creates at
each operating base. The second is the use of proprietary cleaning solutions.
Third is the use of flash heaters which heat the EO water closer to application
to the carpet, and the fourth is a specially-designed wand lift system. Unlike
traditional carpet cleaning systems, VenturiClean(TM) does not flood the carpet
or leave chemicals or cleaning agents in the carpet fibers as a by-product of
its cleaning process. VenturiClean(TM) uses three proprietary cleaning agents or
fluids. Each is non-toxic, with no surfactants, shampoos or harmful solvents.
The first cleaning fluid, "Clean Right", is an organic, mineral-based cleaning
agent designed to be used as a spotting agent with high temperatures to emulsify
particles in excessively dirty carpet. The other two proprietary cleaning
products (EPA I and EPA II) are forms of EO water, and have been molecularly
modified and electrically charged to increase their cleaning efficiency. EPA I
has a low pH, and EPA II has a high pH, to address different cleaning needs.
Venturi believes that each of these proprietary cleaning agents is non-toxic and
may be ingested without harmful effect. Each leaves no residue as a by-product
of the cleaning process. Each cleaning agent kills bacteria, mold, spores,
viruses and other pathogens within a short time after contact.
Venturi's primary source of revenues is from carpet cleaning and flood
restoration services.
Venturi has experienced substantial growth in sales and net income in recent
years. From 1994 to 1997, Venturi's sales grew from $230,300 to $2,160,562.
Venturi intends to capitalize on its proprietary VenturiClean(TM) system and
continue to consolidate this fragmented industry, and to develop repeat clients
in all segments of the industry.
HISTORY AND DEVELOPMENT OF VENTURI
Venturi was incorporated in Nevada on January 30, 1997, under the name Hi Tek
Carpet Care, Inc. Venturi was formed as a Rule 504 specific intent corporation
for the purpose of acquiring an interest in Action
17
<PAGE> 23
Venturi Technologies, Inc., a Texas corporation formed on August 17, 1994. The
Texas corporation became a wholly-owned subsidiary of Venturi when the
stockholders of the Texas corporation exchanged all of the issued and
outstanding shares of the Texas corporation for shares of Common Stock and
Preferred Stock of Venturi. The share exchange was consummated pursuant to a
Stock for Stock Agreement dated as of June 30, 1997, and was treated as a
tax-free reorganization; however, Venturi did not receive an opinion of counsel
to that effect. In connection with the reorganization, Hi Tek Carpet Care, Inc.
changed its name to Venturi Technology Enterprises, Inc., and recently changed
its name to Venturi Technologies, Inc. Through its subsidiary, Venturi acquired
the assets of two carpet cleaning companies in Texas and Utah during 1995 and
1996.
Venturi was approved for trading on April 10, 1997 on the NASD OTC Bulletin
Board, under the symbol "VTIX".
In 1995, the Texas corporation acquired substantially all of the net assets of
Dependable Janitorial, Inc. and Dependable Carpet Cleaning, an Orem, Utah-based
company, pursuant to a Contract of Sale. The Texas corporation issued 137,499
shares of common stock in the exchange. In March 1996, the Texas corporation
exchanged 100,000 shares of its common stock for substantially all of the net
assets of T-Co Carpet Cleaning and T-Co Heating Systems, and Preferred Carpet
Care of Dallas. T-Co had operations in Irving, Texas, providing carpet cleaning
services and manufacturing heating units for carpet cleaning equipment. Venturi
has integrated the heaters manufactured by T-Co Heating Systems, and has
developed certain additional proprietary equipment used in its proprietary
VenturiClean(TM) cleaning method. Venturi formed a separate wholly-owned
subsidiary named "T-Co Manufacturing, Inc." as a Utah corporation in 1997. This
corporation has never functioned as a separate entity, and has no employees or
assets.
In October 1996, the Texas corporation exchanged 22,000 shares of its Common
Stock for substantially all of the net assets of Stone Flood & Fire Restoration
and ProTech Restoration, with carpet cleaning and restoration operations in
Provo, Utah.
In March 1998, Venturi acquired substantially all of the net assets of Protech
Carpet Cleaning and Flood Restoration, of Riverton, Utah, in exchange for 4,000
shares of Common Stock. In April 1998, Venturi acquired substantially all of the
net assets of Complete Carpet Service, a Dallas, Texas-based carpet cleaning
enterprise, in exchange for 7,500 shares of Common Stock. In July 1998, Venturi
acquired substantially all of the net assets of a sole proprietorship doing
business in Lancaster, California under the names "All Valley Carpet, All Valley
Carpet & Upholstery Cleaning and All Valley Restoration Service." These assets
were acquired in exchange for 5,000 shares of Venturi's Common Stock. The
acquisition remains subject to a right of rescission that runs for sixty (60)
days after the closing. In June 1998, Venturi also acquired substantially all of
the net assets of Video-Aire, a company providing duct cleaning services, in
exchange for 160,000 shares of Common Stock, payable in two installments, and
$600,000 cash, payable in two installments. The acquisition remains subject to a
right of rescission that runs for sixty (60) days after the closing. Venturi
views this acquisition as an opportunity for up-selling prior to rendering
carpet cleaning services. One of the Video Aire assets acquired is proprietary
duct cleaning equipment which Venturi believes can be successfully integrated
into the VenturiClean(TM) system.
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<PAGE> 24
Venturi has made offers to acquire substantially all of the net assets of two
additional carpet cleaning businesses. One such acquisition is located in
Houston, Texas, and Venturi has offered to exchange 52,632 shares of Common
Stock for substantially all of such assets. The other offer relates to
substantially all of the net assets of a fire and flood restoration business
located in Orem, Utah. The price has not yet been agreed upon; however, Venturi
expects to issue shares of Common Stock in that transaction. Both offers have
been accepted, and subject to final due diligence and satisfaction of other
conditions, both transactions should be completed within the next sixty (60)
days.
The Texas corporation entered two other acquisition agreements with parties
related to each other; however, for various reasons the assets so acquired were
eventually divested. See the "Risk Factors" section, which begins on page 2.
This failed acquisition has led to litigation against Venturi. See "Legal
Proceedings."
To preserve its capital resources, Venturi consummated these transactions
without the assistance of legal counsel. Although Venturi believes that such
transactions qualify for tax-free treatment under the Internal Revenue Code of
1986, as amended, and for exemptions from securities registration requirements,
Venturi did not receive an opinion of counsel to that effect. If it is
subsequently determined that the acquisitions created tax liability or violated
applicable securities laws, this could have a material adverse effect on Venturi
and its operations, and financial condition. See the "Risk Factors" section,
which begins on page 2.
INDUSTRY OVERVIEW
As reported by industry sources, the annual domestic market for carpet cleaning
services was approximately $5 to $10 billion in 1997; and the market for flood
repair and restoration was estimated to be much larger.
The industry can be divided into four segments: commercial cleaning, apartment
and multi-family residential cleaning, singly-family residential cleaning and
restoration or disaster cleanup. The industry is highly fragmented, although
there are a small number of franchise competitors, such as Service Master,
ChemDry and DuraClean.
Current carpet cleaning technology has remained the same for the past 20 years.
Despite the fact that trade publications have estimated that nearly 90% of
carpet cleaning customers are dissatisfied with the results of their carpet
cleaning services, no improvements had been made in the basic technology until
Venturi developed VenturiClean(TM) and entered the market. Two basic carpet
cleaning methods are used throughout the rest of the industry: the steam
extraction method and the CO2 foam method. Approximately 40% of carpet cleaning
uses the steam extraction method, which involves the injection of hot water into
the carpet, usually at a pressure of about 300 psi, and the use of a vacuum
process to attempt to remove the water. Some companies using the steam
extraction method apply a soap or chemical prespray followed by a rinse with
clean water; others use water with chemical or soap solutions during the
cleaning phase without a rinse. This method is not as effective as
VenturiClean(TM) because the water used penetrates the carpet backing and pad
before the vacuum process can retrieve that water. Only about 60% of the water
applied to the carpet is ever retrieved; the rest remains in the carpet fiber,
backing and pad, requiring days to dry. Once the water has evaporated, it leaves
a residue of soils, chemicals and surfactants, and often feels crusty. The
residual
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<PAGE> 25
surfactants act as magnets for dirt particles, and the carpet becomes soiled
soon after the cleaning. This process also causes delamination of the carpet
backing, weakening the carpet fibers.
The other basic method is CO2 foam. Although drier than steam extraction, the
CO2 foam method still requires cleaning and foaming chemicals to be mixed with
water and then applied to the carpet. The expanding foam is intended to lift
particles out of the carpet for extraction with a vacuum process or dry pad
buffing. An alternative method uses carbonated water designed to effervesce soil
from the carpet. The residue is then buffed out with a cotton towel on a buffing
machine. The carpet fiber does not get as wet as with the steam extraction
method, but the vacuuming of foam and the buffing of carbonated chemicals does
not remove soils and surfactants with the efficiency of VenturiClean(TM).
The oldest carpet cleaning method uses a rotary shampoo machine. The carpet is
scrubbed with a rotary buffing machine to shampoo soap into the carpet with a
bristle pad and then the carpet is vacuumed while still wet. This method also
wets the carpet backing and pad and leaves behind surfactant residue.
MARKETING
The primary method of selling carpet cleaning to individuals is through mass
marketing, through billboards, distribution of coupons, advertising in yellow
pages, local publications, door hangers, and telemarketing. In addition, Venturi
participates in trade shows and local chamber of commerce events, such as golf
tournaments and luncheons. Multi-family carpet cleaning services are promoted in
this manner, and also through advertising in industry publications, targeting of
national apartment management companies and demonstrations. Services for
commercial properties are marketed to building maintenance companies, and
through demonstrations and participation in local building management
associations. Finally, restoration services are marketed primarily through
industry publications and participation in industry associations and trade
shows.
RAW MATERIALS; PATENTS; LICENSES; TRADEMARKS AND SERVICE MARKS
Venturi's proprietary technology permits it to remove virtually all of the dirt,
soils and residue from a carpet; most other methods commonly in use by Venturi's
competitors remove much less of the dirt, soils and residue. Further, through
use of Venturi's proprietary technology, which removes virtually all of the
fluids used in its process, carpets dry within hours of cleaning, whereas the
drying time can extend up to several days using the methods of Venturi's
competitors. Venturi has applied for two patents relating to its equipment and
technology. One relates to the use of EO water in a carpet cleaner, and the
other relates to the water heater. The United States Patent and Trademark Office
has issued a notice of allowance for the carpet cleaner patent application.
Venturi licenses some of its technology from several sources. The raw materials
necessary for the delivery of Venturi's services are: EO water, trucks and
utility shells, and cleaning units. Venturi manufactures its own EO water using
equipment purchased from Primacide, L.C., a Nevada limited liability company,
pursuant to an Exclusive Use and Purchase Agreement. Primacide is owned by
International Acqua Chemicals L.C. and Destiny Recovery Systems, L.C. Each of
the members owns 50% of Primacide.
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<PAGE> 26
Destiny Recovery Systems, L.C. is a Nevada limited liability company, of which
30% is owned by Venturi and 70% is owned by Gaylord Karren and John Hopkins,
Venturi's Chairman and Chief Executive Officer and President, respectively. Each
operating base must have a machine for the manufacture of EO water. Venturi
currently purchases these machines from Primacide at a cost of $6,000 per
machine. A new, more efficient model of this machine will be available at a
price of $9,500 per machine. Venturi expects to begin acquiring and using the
new model as soon as it is available, and to replace the old machines as cash
flow permits. Venturi does not own any patents or other intellectual property
rights related to the manufacture of EO water or the manufacture of the machines
acquired from Primacide. The Primacide agreement grants Venturi the worldwide
rights to use and exploit the EO technology in the carpet cleaning and
ventilation duct cleaning industries, and allows Venturi to purchase its entire
requirements for EO machines. The Primacide agreement runs until May 5, 2003,
but is automatically renewed on a yearly basis thereafter. It may be terminated
by either party after 120 days written notice or after 30 days written notice if
the other party fails to comply with its terms.
Venturi is a party to a Requirements Contract with DT Enterprises, a California
proprietorship, dated February 15, 1996, pursuant to which it purchases its
requirements for the Clean Right carpet cleaning solution. The contract has no
minimum purchase requirements, and the cleaning products are priced at DT
Enterprises' current list prices. The contract runs for a period of 10 years
from its date, and may be extended for an additional term of 10 years at
Venturi's option.
Venturi has contracted with Prochem, Inc., the industry's leading manufacturer
of professional carpet cleaning equipment to manufacture and assemble the
Venturi truck mount units, which employ the VenturiClean(TM) technology. Prochem
has two plants in Arizona, and has the capacity to meet Venturi's truck
production schedule for the foreseeable future. Even if this were not the case,
the items manufactured by Prochem are readily obtainable from other sources.
Prochem does not provide carpet cleaning or restoration services, and is not a
competitor of Venturi.
Venturi has applied for a patent on the heaters manufactured by T-Co
Manufacturing. The heating unit is an electronically monitored dual flow flash
heater, which permits detailed control of the water temperature, enabling
Venturi to deliver water to the carpet fibers at a constant temperature. Venturi
has applied for a patent on the unique features of the heater.
Venturi has filed an application to register the mark Venturi Technologies with
the United States Patent and Trademark Office, and is in the process of applying
to register the mark VenturiClean(TM). Venturi intends to apply for trademark or
service mark registration as additional terminology for its services and
products are developed.
MANUFACTURING
Venturi has no separate manufacturing facility. Rather, all of its manufacturing
is performed at its headquarters in Orem, Utah on an as-needed basis.
21
<PAGE> 27
CUSTOMERS
Venturi's customers consist principally of individuals located in Texas and
Utah, commercial property owners and managers, and insurance companies. No
single customer accounts for five percent (5%) or more of Venturi's sales. The
largest concentration of Venturi's customers are in Texas. Venturi has no plans
to market its services outside the United States in the foreseeable future.
GOVERNMENT REGULATION
Venturi's present operations are not subject to special regulatory controls.
COMPETITION
VenturiClean(TM) removes virtually all of the dirt, soils and residue from a
carpet; most other methods commonly in use by Venturi's competitors remove much
less dirt, soils and residue. Further, the removal of virtually all of the
fluids used in the VenturiClean(TM) process, allows carpets to dry within hours
of cleaning, whereas the drying time can extend up to several days using the
methods of Venturi's competitors.
Despite these technological improvements, Venturi remains subject to significant
competition. The carpet cleaning industry is highly fragmented, with thousands
of companies nationwide, many of which are sole proprietorships. Venturi faces
further competition in recruitment of personnel and distributors. Some of
Venturi's competitors are substantially larger and have available considerably
greater financial resources than Venturi. Venturi's ability to remain
competitive depends, in significant part, on Venturi's ability to continue its
acquisition program and to recruit and retain personnel. Although Venturi
believes its benefit and compensation plans, and other incentive programs
provide its employees with significant earning potential, there can be no
assurance that Venturi's programs for recruitment and retention of personnel
will be successful.
Venturi cannot guarantee that its competitors will not develop proprietary
systems with capabilities similar to VenturiClean(TM) without violating any of
Venturi's intellectual property rights.
RESEARCH AND DEVELOPMENT
Venturi has expended approximately $15,000 over the last two fiscal years on
research and development activities. In 1997, Venturi commissioned an analysis
of carpet cleaning systems by Combustion Resources, a Utah limited liability
company, which produced a report on September 19, 1997, comparing
VenturiClean(TM) with the standard carpet cleaning methods described above. The
analysis was performed by Dr. L. Douglas Smoot, the past Dean of the College of
Engineering and Technology, professor of Chemical Engineering and current
Director of the Advanced Combustion Engineering Research Center at Brigham Young
University. The study found that VenturiClean(TM) prevented scale build-up and
improved cleaning performance by killing bacteria.
22
<PAGE> 28
There are no long term studies on the effect of prolonged exposure to EO water.
Although Venturi believes such exposure has no known side effects, Venturi has
not commissioned any study of same.
EMPLOYEES
As of June 30, 1998, Venturi had 130 full-time employees. These numbers include
personnel located at Venturi's bases in Texas and Utah, as well as
administrative personnel. Venturi considers its employee relationships to be
satisfactory. None of Venturi's employees is a member of any labor union, and
Venturi has never experienced any business interruption as a result of any labor
disputes.
FACILITIES
Venturi rents its headquarters building, located in Orem, Utah, and the
following additional facilities, which have lease terms between 6 months and 60
months, and lease payments between $675 to $4,000 for its headquarters:
<TABLE>
<CAPTION>
PURPOSE LOCATION
<S> <C>
Headquarters 1327 North State, Orem, Utah
Operating Base 3322 Garden Brook, Dallas, Texas
Operating Base 218 West Cottage, Sandy, Utah
Operating Base 8550 Winkler, Suite B, Houston Texas
Operating Base 350 South Beltline, Suite 101, Irving, Texas
Operating Base 5709 D 40th Street, Lubbock, Texas
Operating Base 930 North 1610 West, Orem, Utah
(Restoration)
Operating Base 2223 Handley Ederville Rd., Fort Worth, Texas
Operating Base 2763 West Avenue L, #170, Lancaster, CA
</TABLE>
Venturi also leases mobile office space located adjacent to its headquarters
building in Orem, Utah, which house certain administrative and training
personnel. This space is leased for a term of 6 months, at a cost of $1,050.00
per month.
Venturi believes that each of its facilities is suitable for its current use.
Venturi also believes that upon expiration of the current lease terms, alternate
space would be available at reasonable cost for continuation of its business.
In addition to these leased properties, Venturi owns two parcels in Orem, Utah
which serve as an operating base. These properties have outstanding mortgages of
$48,802 and $52,940, with monthly payments of $747 and $677, respectively.
Venturi has entered a Master Lease Agreement with Northstar Capital, LLC, to
provide funding in an amount not to exceed $3,000,000 to acquire trucks and
equipment. Pursuant to this Master Lease
23
<PAGE> 29
Agreement, Venturi has signed four (4) equipment schedules having balances of
$182,186, 112,577, $262,665, and $192,371. The monthly payments on these
equipment schedules is $6,695, $4,120, $9,741 and $6,738, respectively.
Venturi also has outstanding four (4) equipment schedules with Sentry Financial,
with unpaid balances of $28,275, $15,436, $32,690 and $134,360. These leases
have monthly payments of $2,182, $1,145, $2,280 and $5,975, respectively. The
Master Lease Agreement with Northstar Capital replaced the Sentry Financial
facility.
In May of 1998, Venturi received a commitment from Capital Partners, Inc. to
obtain lease financing of up to $3,000,000. Venturi has not yet used this
facility.
LEGAL PROCEEDINGS
Venturi is currently a party to a lawsuit, captioned Hal B. Phillips, Beverly H.
Phillips and Qualitek Supply, Inc. v. Venturi Technology Enterprises, Inc.,
Gaylord Karren, John Hopkins, William C. Thomas, Merrill L. Littlewood and James
A. Frame, Cause No. 98-03695, 126th District Court, Travis County, Texas. The
lawsuit arose out of the acquisition of plaintiff's business assets on March 30,
1996, pursuant to an Asset Purchase Agreement. In approximately August 1996,
Venturi terminated its relationship with the plaintiffs and in April 1997 filed
a lawsuit in Utah State Court alleging that Hal B. Phillips, Beverly Phillips
and Qualitek Supply, Inc. made misrepresentations to Venturi to induce Venturi
to acquire the assets and had breached the Asset Purchase Agreement, and
requesting that the Asset Purchase Agreement be rescinded or terminated. The
Utah State Court action was dismissed on the grounds that the Utah court did not
have personal jurisdiction over the defendants, who were residents of the State
of Texas, and did not have sufficient contacts with the State of Utah. On April
8, 1998, the Phillips and Qualitek filed this action in Texas State Court
alleging violations of Texas securities laws in connection with the issuance of
100,000 shares of Venturi Common Stock in exchange for the assets of Qualitek,
as well as fraud, negligent misrepresentation, breach of contract and
conversion, and seeking damages in the amount of $2,500,000. Venturi has filed
an answer and counterclaim asserting the same claims as in the Utah state
action. A motion has been filed to consolidate these cases. Venturi intends to
vigorously defend this lawsuit. Discovery has not yet been completed, and it is
difficult to evaluate the likelihood of an unfavorable outcome to Venturi.
Venturi believes any damage award should be nominal; however, there can be no
assurance that this will be the case. Venturi's operations could be jeopardized
to the extent a damage award exceeded the amount of liquid assets available for
payment of such award. Venturi believes that this lawsuit will not have a
material adverse effect on the business, financial condition or results of
operations of Venturi, even if it results in an award of damages against
Venturi.
MANAGEMENT
The following table sets forth certain information regarding the directors and
executive officers of Venturi.
24
<PAGE> 30
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gaylord M. Karren 50 Chairman, Chief Executive Officer,
Director
John M. Hopkins 47 President, Director
William Thomas 45 Vice President of Assimilations
Merril L. Littlewood 54 Chief Financial Officer
Joel Karren 44 Vice President of Training
Ronald M. Karren 36 Vice President of Corporate
Communications, and Secretary
James Stone 35 Vice President of Operations
</TABLE>
TERMS OF OFFICE
The directors of Venturi hold office until the next annual meeting of
stockholders of Venturi or until their successors are elected and duly
qualified. All officers serve at the discretion of the directors.
After the Offering, Venturi's board will be expanded to five (5) members, and
Venturi will establish an audit committee and a compensation committee,
consisting of at least 2 independent directors. The compensation committee will
make decisions regarding salaries, incentive compensation, stock option grants
and other matters with respect to executive officers and other key employees of
Venturi.
BUSINESS EXPERIENCE
Gaylord M. Karren has served as Chairman, Chief Executive Officer and
Director since Venturi's founding. Mr. Karren obtained
his Bachelor of Arts degree in Finance and Banking from
Brigham Young University in 1973; and his Masters Degree
in Banking from the University of Oklahoma in 1979.
Prior to founding Venturi, Mr. Karren managed apartment
complexes and retirement homes; formed and operated oil
and gas ventures; and directed lending operations for
leading banks in Montana and Utah.
John M. Hopkins has served as President and Director since Venturi's
founding. Prior to forming Venturi, Mr. Hopkins was a
property manager, and co-founded an oil drilling
company. In addition, he was active in chemical and oil
sales operations. Mr. Hopkins attended Utah State
University, with a pre-engineering emphasis.
William Thomas has served as Vice President of Assimilations since
January 30, 1995. Mr. Thomas was the owner and operator
of T-Co Manufacturing prior to its acquisition by
Venturi. Prior to forming T-Co Manufacturing in 1989,
Mr. Thomas operated carpet cleaning services in Garland
and Lubbock, Texas. He received his B.A. degree from
Texas Tech University in 1974, and was
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<PAGE> 31
enrolled in the Texas Tech Graduate School Clinical
Psychology Master/Doctorate Program in 1976.
Merril L. Littlewood has served as Venturi's Chief Financial Officer since
January 1, 1998. Mr. Littlewood is a certified public
accountant, and has been associated with Potter,
Littlewood & Petty, P.C., certified public accountants,
since 1979. Prior to 1979, he held various accounting
and management positions. He received his Bachelor of
Science Degree in Accounting from Brigham Young
University in 1969.
Ronald M. Karren has served as Venturi's Vice President of Corporate
Communications since April 1, 1997, and as its corporate
Secretary since July 1, 1998. Mr. Karren graduated from
Brigham Young University in 1991, with a Bachelor of
Science Degree in International Relations, with an
emphasis on Marketing. Prior to joining Venturi, Mr.
Karren was a project manager of a land development
project in Idaho Falls, Idaho. Mr. Karren also founded
the Great Basin Fly & Outfitters in Provo, Utah, an
exclusive fly shop. Ron Karren is the nephew of Gaylord
Karren, Venturi's Chairman and Chief Executive Officer.
Joel Karren is the Vice President of Training, and was the President
of Venturi's subsidiary, T-Co Manufacturing. He was
instrumental in the design of Venturi's first truck
mount carpet cleaning units. Mr. Karren is an expert in
automotive service, and prior to joining Venturi,
operated several successful businesses in California and
Idaho. Joel Karren is the brother of Gaylord Karren,
Venturi's Chairman and Chief Executive Officer.
James Stone has served as Vice President of Operations since
January 4, 1998. Prior to joining the Company, Mr. Stone
was the founder and chief operating officer of Pro-Tech
Restoration, Inc. and Stone Flood and Fire, which was
acquired by the Company in 1996. Mr. Stone has also
founded a securities firm.
EXECUTIVE COMPENSATION
No officer has received compensation in excess of $100,00 in any of the past
three years. The following table sets forth information as to the compensation
paid or accrued to Venturi's Chief Executive Officer and President for the three
years ended December 31, 1997. The salary column includes certain management
fees paid in lieu of wages.
26
<PAGE> 32
<TABLE>
<CAPTION>
NAME/ POSITION YEAR SALARY BONUS OTHER OPTIONS
- -------------- ---- ------ ----- ----- -------
<S> <C> <C> <C> <C> <C>
Gaylord Karren 1997 90,000 none none none
Chairman, Chief
Executive 1996 90,000 none none none
Officer and Director 1995 57,000 none none none
John Hopkins 1997 90,000 none none none
President 1996 90,000 none none none
and Director 1995 57,000 none none none
</TABLE>
Venturi issued options to acquire 104,000 shares of Common Stock to Mr. Karren
and to Mr. Hopkins in May of 1998, at a strike price of $.01 per share. See
"Option Exercises and Holdings."
DIRECTORS COMPENSATION
No Compensation has been paid to any directors for service in such capacity in
the past, and no such compensation is presently payable to directors, but
directors may be reimbursed for certain expenses in connection with attendance
at Board and committee meetings. At such time as the Board of Directors deems
appropriate, the Company intends to consider adoption of an appropriate policy
to compensate non-employee directors, to attract and retain the services of
qualified non-employee directors.
COMPENSATION PURSUANT TO BENEFIT PLANS AND ARRANGEMENTS
STOCK OPTIONS
By resolution dated July 1, 1997, Venturi's Board of Directors adopted a Dual
Stock Option Plan, and reserved 2,000,000 shares of the Company's Common Stock
for issuance pursuant to the Plan. The Plan is a continuation of a similar plan
adopted by the Texas corporation in July of 1996. Of the Common Stock reserved
for issuance pursuant to the Plan, 1,500,000 shares are allocated to the
Employee Program, and 500,000 shares are allocated to the Consultant Program.
The Employee Program is for all key employees (including employees who are also
directors of the Company or its subsidiaries). The Consultant Program is for all
consultants including directors who are not also employees of the Company.
Options granted pursuant to the Employee Program are intended to qualify as
Incentive Stock Options under Section 422 of the Internal Revenue Code of 1986,
as amended, and options granted under the Consultant Program are intended to be
Non-Statutory Stock Options. The Plan shall be administered by a Stock Option
Committee consisting of not less than 2 members of the Board, or the entire
Board. The entire Board administers the Consultant Program. After the Offering,
the Company shall ensure that the committee satisfies the requirements of
Section 16 of the Exchange Act and the Code. The administrator determines the
terms of options granted under the Plan, including the number of shares subject
to the option, exercise price, term and the rate at which the options become
exercisable. The exercise price of all incentive stock options granted under
27
<PAGE> 33
the Plan must be at least equal to the fair market value of the Common Stock of
the Company on the date the option is granted.
The options vest immediately and their term may not exceed ten years. If not
terminated earlier, the Plan will terminate on July 1, 2006. Termination will
not affect rights and obligations granted prior to termination. The
administrator has the authority to amend or terminate the Plan so long as such
amendment or termination does not adversely affect any outstanding options.
As of June 30, 1998, 470,007 incentive stock options had been granted under the
Plan at an option price of $2.40; and 608,000 nonqualified stock options had
been granted at $.01 per share. In December, 1997, Venturi recorded compensation
expense of $1,396,000 for the difference between the strike price and the fair
value of the underlying stock ($3.50 per share) at the date of grant. Venturi
has not yet recorded compensation expense for options granted in 1998.
OPTION EXERCISES AND HOLDINGS
No stock options were exercised by the named executive officers during fiscal
1997 or as of June 30, 1998. The following table sets forth information with
respect to the aggregate number of unexercised options to purchase Common Stock
granted in all years to the named executive officers and held by them as of June
30, 1998, and the value of unexercised in-the-money options (i.e. options that
had a positive spread between the exercise price and the public offering price
of the Common Stock) as of June 30, 1998:
<TABLE>
<CAPTION>
Name Unexercised Options Value of Unexercised
---- ------------------- --------------------
Options (1)
-----------
<S> <C> <C>
Gaylord Karren (2) 104,000 $ 323,960
John Hopkins (2) 104,000 $ 323,960
Merril L. Littlewood (2) 400,000 $1,246,000
Joel Karren (3) 71,800 $ 52,055
William Thomas (3) 28,500 $ 20,663
James Stone (3) 2,000 $ 1,450
Ronald M. Karren (3) 2,000 $ 1,450
</TABLE>
(1) Calculated using an assumed public offering price of $3.125.
(2) These options have an exercise price of $.01.
(3) These options have an exercise price of $2.40.
28
<PAGE> 34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Merril L. Littlewood, the Chief Financial Officer of the Company, is also a
principal in Potter Littlewood & Petty, P.C., certified public accountants, the
company who has prepared Venturi's tax returns for the years 1995, 1996, and
1997.
Venturi has outstanding loans from its executive officers and principal
shareholders. It presently owes Gaylord Karren $83,591; John Hopkins $55,000;
and James Stone $314,583. The loans of Gaylord Karren and John Hopkins do not
bear interest. The James Stone loans bear interest ranging from 8.9% to 17.11%.
Venturi issued 700,866 shares of Common Stock to Gaylord Karren and John Hopkins
in consideration of the assignment to Venturi of certain patent applications and
in lieu of interest on the loans referred to above. Venturi owns 30% of Destiny
Recovery Systems, a Nevada limited liability company, of which Gaylord Karren
and John Hopkins own 70%. Destiny Recovery Systems in turn owns 50% of
Primacide, L.C., a Nevada limited liability company. No payments have been made
to Primacide by Venturi, except amounts paid for the purchase price of the EO
water manufacturing machines. See "Raw Materials; Patents; Licenses; Trademarks
and Service Marks."
Randy K. Johnson is Venturi's general counsel. He also served as Venturi's
corporate Secretary until July 1, 1998. Venturi has paid $38,907.25 to Mr.
Johnson or firms in which he practices for legal services rendered since January
1, 1997. Venturi owes Mr. Johnson or firms in which he practices $58,242 for
services rendered.
Venturi entered a Consulting Agreement with Capital Solutions, Inc., a Delaware
corporation, pursuant to which CSI has agreed to assist Venturi in locating and
obtaining sources of additional capital. In consideration for such services,
Venturi paid CSI a non-refundable, nonaccountable expense retainer of $10,000.
Venturi is a party to a financial consulting agreement with Capital Solutions of
Salt Lake City, Utah. Pursuant to his agreement, Venturi has issued 150,000
shares of Common Stock in lieu of cash payment for consulting services rendered.
Venturi is a party to a Registration Rights Agreement with Equity Services,
Ltd., dated December 31, 1997. Equity Services, Ltd. is the holder of 10,000
shares of Venturi's issued and outstanding Series B Preferred Stock. This stock
was issued in consideration for acting as placement agent for the Series B
Preferred Stock. The Registration Rights Agreement grants ESL the right to
demand that Venturi register under the Securities Act Common Stock issuable upon
conversion of the Series B Preferred Stock. This demand right commences June 30,
1999, and Venturi is obligated to use its best efforts to effect such a
registration. Also commencing on June 30, 1999, ESL is entitled to participate
in any registration of Common Stock initiated by Venturi. In connection with
this Offering, the Series B Preferred stock is being surrendered and canceled in
exchange for issuance to ESL of Common Stock included in this Offering. As a
result, after completion of the Offering, there will be no Series B Preferred
Stock subject to the Registration Rights Agreement.
29
<PAGE> 35
Venturi also is a party to a Registration Rights Agreement with Entrepreneurial
Investors, Ltd., dated December 31, 1997. Entrepreneurial Investors, Ltd. is the
holder of 250,000 shares of Venturi's issued and outstanding Series B Preferred
Stock. Together, ESL and EES own all of the issued and outstanding shares of
Venturi's Series B Preferred Stock. The Registration Rights Agreement grants EES
the right to demand that Venturi register under the Securities Act Common Stock
issuable upon conversion of the Series B Preferred Stock. This demand right
commences December 31, 1997, and Venturi is obligated to use its best efforts to
effect such a registration. Also commencing on December 31, 1997, EES is
entitled to participate in any registration of Common Stock initiated by
Venturi. In connection with this Offering, the Series B Preferred stock is being
surrendered and canceled in exchange for issuance to EES of Common Stock
included in this Offering. As a result, after completion of the Offering, there
will be no Series B Preferred Stock subject to the Registration Rights
Agreement.
Venturi is a party to a Business and Financial Advisory Agreement with CDL
Capital Corp. (one of the holders of the Series C Preferred Stock), pursuant to
which Venturi retained CDL Capital Corp. to serve as its financial advisor.
Venturi is obligated to reimburse CDL Capital Corp. for expenses, to pay
consulting fees of $200 per hour, and to pay a success fee equal to a percentage
of funds raised for Venturi through debt or equity financings. As a retainer,
CDL Capital Corp. was paid a fee of warrants to acquire 100,000 shares of Common
Stock, at an exercise price of $2.05 per share. The agreement runs for a period
of one year from March 10, 1998, the date it was signed.
PRINCIPAL AND CONVERTING STOCKHOLDERS
The following table sets forth certain information as of the date of this
Prospectus, regarding ownership of Venturi's Common Stock (i) by each person
known by Venturi to be the beneficial owner of more than 5% of Venturi's
outstanding Common Stock, (ii) by each director of Venturi, (iii) by certain
related stockholders, and (iv) by all executive officers and directors of
Venturi as a group. All persons named have sole voting and investment power with
respect to such shares, subject to community property laws, and except as
otherwise noted. The table includes unexercised options to acquire Common Stock
held by executive officers and directors. The table assumes that there will be
6,707,666 shares of Common Stock outstanding after the Offering, and that there
are 5,930,811 shares of Common Stock outstanding (being the sum 4,752,804 shares
of Common Stock outstanding as of June 30, 1998 plus the options to acquire
1,178,007 shares of Common Stock outstanding as of June 30, 1998).
30
<PAGE> 36
<TABLE>
<CAPTION>
Percentage Beneficially Owned
-----------------------------
Stockholder Name (1) Number of Shares Owned Before Offering After Offering (2)
- ---------------- ---------------------- --------------- ------------------
<S> <C> <C> <C>
5% STOCKHOLDERS
---------------
Gaylord Karren 1,121,515 18.9% 16.7%
John Hopkins 1,121,515 18.9% 16.7%
Merrill Littlewood (3) 402,734 6.8% 6.0%
DIRECTORS AND OFFICERS
Gaylord Karren 1,121,515 18.9% 16.7%
John Hopkins 1,121,515 18.9% 16.7%
William Thomas 89,618 1.5% 1.3%
Merril L. Littlewood (3) 402,734 6.8% 6.8%
Joel Karren 72,381 1.2% 1.2%
Ronald M. Karren 29,069 *% *%
James Stone 27,383 *% *%
All executive officers and directors as a
group (seven persons) 2,864,215 47.3% 41.7%
CONVERTING STOCKHOLDERS
-----------------------
Entrepreneurial Investors, Ltd. (4) 1,550,000 0 23.1%
InvestLinc Emerging
Growth Fund, LLC (5) 372,862 0 5.6%
</TABLE>
*Less than 1%
(1) See table under "Management of Venturi" for offices and directorships held
by the persons listed hereunder. (2) Assumes issuance of all shares of Common
Stock offered hereby. (3) Includes 400,000 shares for which Mr. Littlewood holds
options, and 2,734 shares owned outright. (4) Series B Preferred Stockholders.
See "Description of Securities--Preferred Stock Conversion." (5) Series C
Preferred Stockholders. See "Description of Securities--Preferred Stock
Conversion."
DESCRIPTION OF SECURITIES
The following description is a summary and is qualified in its entirety by the
provisions of Venturi's Articles of Incorporation and Bylaws, copies of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
31
<PAGE> 37
COMMON STOCK
GENERAL. Venturi is authorized to issue 20,000,000 shares of Common Stock, $.001
par value per share. At June 30, 1998, there were 4,752,804 shares issued and
outstanding. All shares of Common Stock outstanding are validly issued, fully
paid and non-assessable. There are presently outstanding warrants to acquire
677,269 shares of Common Stock.
VOTING RIGHTS. Each share of Common Stock entitles the holder thereof to one
vote, either in person or by proxy, at meetings of stockholders. The holders are
not permitted to vote their shares cumulatively. Accordingly, the holders of
Common Stock holding, in the aggregate, more than fifty percent (50%) of the
total voting rights can elect all of the directors of Venturi.
DIVIDEND POLICY. All shares of Common Stock are entitled to participate ratably
in dividends when and as declared by Venturi's Board of Directors out of the
funds legally available therefore and subject to the rights, if any, of the
holders of outstanding shares of preferred stock. Any such dividends may be paid
in cash, property or additional shares of Common Stock. Venturi has not paid any
dividends on its Common Stock since its inception and presently anticipates that
all earnings, if any, will be retained for development of Venturi's business and
that no dividends on the shares of Common Stock will be declared in the
foreseeable future. Any future dividends will be subject to the discretion of
Venturi's Board of Directors and will depend upon, among other things, future
earnings, the operating and financial condition of Venturi, its capital
requirements, general business conditions and other pertinent facts. Therefore,
there can be no assurance that any dividends on the Common Stock will be paid in
the future.
MISCELLANEOUS RIGHTS AND PROVISIONS. Holders of Common Stock have no preemptive
or other subscription rights, conversion rights, redemption or sinking fund
provisions. In the event of the dissolution, whether voluntary or involuntary,
of Venturi, each share of Common Stock is entitled to share ratably in any
assets available for distribution to holders of the equity of Venturi after
satisfaction of all liabilities and payment of the applicable liquidation
preference of any outstanding shares of Preferred Stock.
CERTAIN PROVISIONS OF NEVADA LAW AND OF VENTURI'S ARTICLES OF INCORPORATION AND
BYLAWS. Venturi's Articles of Incorporation and Bylaws require Venturi to
indemnify its directors and officers to the fullest extent permitted by Nevada
law. Nevada law presently provides that in the case of a nonderivative action
(that is, an action other than by or in the right of a corporation to procure a
judgment in its own favor), a corporation has the power to indemnify any person
who was or is a party or is threatened to be made a party to any proceeding by
reason of the fact that the person is or was an agent of the corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe that the conduct of the person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent does not, of itself, create a
presumption that the person did not act in good faith and in a manner
32
<PAGE> 38
that the person reasonably believed to be in the best interests of the
corporation or that the person had reasonable cause to believe that the person's
conduct was unlawful.
With respect to derivative actions, Nevada law provides that a corporation has
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
the person is or was an agent of the corporation, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of the action if the person acted in good faith, in a manner the person believed
to be in the best interests of the corporation and its stockholders.
Indemnification is not permitted to be made in respect of any claim, issue, or
matter as to which the person shall have been adjudged to be liable to the
corporation in the performance of that person's duty to the corporation and its
stockholders, unless and only to the extent that the court in which the
proceeding is or was pending determines that, in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for
expenses, and then only to the extent that the court shall determine.
Venturi does not maintain director and officer liability insurance.
TRANSFER AGENT. Zions Bank, has been appointed the transfer agent for the Common
Stock and Preferred Stock, and can be reached at Main Street & South Temple, 3rd
Floor, Salt Lake City, Utah 84111, Attention: Shelene Brown.
PREFERRED STOCK
Venturi's Articles of Incorporation authorize the issuance of up to 5,000,000
shares of Preferred Stock with a par value of per share. The Articles provide
that such Preferred Stock may contain special preferences as determined by the
Board of Directors of Venturi, including, but not limited to, the bearing of
interest and convertibility into shares of Common Stock of Venturi. Venturi's
Board has created three series of Preferred Stock, 10% Cumulative Convertible
Series A Preferred Stock, 6% Cumulative Convertible Series B Preferred Stock,
and 6% Cumulative Convertible Series C Preferred Stock. In connection with the
preparation of this Offering, Venturi became aware of a possible ambiguity in
the language in its Articles of Incorporation dealing with the authority of the
Board of Directors to create separate series of Preferred Stock. The relevant
language in the Articles of Incorporation provides that the Preferred Stock may
contain special preferences as determined by the Board of Directors. Section
78.195 of the Nevada General Corporation Law provides that the Articles of
Incorporation may vest in the Board of Directors the authority to prescribe the
classes, series and number of each class or series of stock. To clarify this
ambiguity, Venturi has amended its Articles of Incorporation to specifically
provide that the Board of Directors has the authority to prescribe classes,
series and number of shares of each class or series of Preferred Stock and the
voting powers, designations, preferences, limitations, restrictions and relative
rights of each class or series of Preferred Stock. This amendment to the
Articles of Incorporation was ratified by a majority of Venturi's stockholders.
Venturi's management believes that all shares of Series A, B and C Preferred
Stock have been duly authorized, and are validly issued and outstanding.
33
<PAGE> 39
SERIES A PREFERRED. Venturi authorized the issuance of up to 150,000 shares of
Series A Preferred Stock, by resolution dated December 24, 1997, although the
exchange of the Series A Preferred for the Series A Preferred of the Texas
corporation was approved June 30, 1997. As of June 30, 1998, there were 64,410
shares of Series A Preferred Stock outstanding. The Series A Preferred Stock is
entitled to receive, when and as declared by the Board, out of funds legally
available for the payment of dividends, cumulative quarterly cash dividends at
the annual rate of $1.00 per share, in preference to and in priority over any
dividends with respect to the Common Stock. Dividends on the Series A Preferred
Stock accumulate from and including their original issue date and are payable on
the tenth day after the end of each calendar quarter. In the event funds are not
legally available to pay such dividends in cash, such dividends shall, at the
option of Venturi, cumulate and be paid in cash at such time as funds are then
legally available to pay such dividends, or be paid in shares of Venturi's
Common Stock valued at the greater of $10.00 per share or 90% of the then market
value of Venturi's Common Stock if such Common Stock is then traded on a
national exchange. As long as shares of the Series A Preferred Stock are
outstanding, if Venturi is in default or in arrears in respect to the payment of
dividends on the Series A Preferred Stock or any stock subsequently issued that
is of equal priority to the Series A Preferred Stock, or with respect to the
optional redemption with respect to the Series A Preferred Stock or any parity
stock, Venturi may not declare, pay or set apart any funds for the payment of
dividends, redemption, repurchase, retirement or sinking fund payments on any of
the Common Stock.
In the event of any liquidation, dissolution or winding up of Venturi, either
voluntary or involuntary, the holders of the Series A Preferred Stock shall be
entitled to receive, after all debts are paid, out of the assets of Venturi, the
sum of $10.00 per share plus an amount equal to all accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding up,
before any payment may be made or any assets distributed to the holders of
Common Stock. If, upon any such liquidation, dissolution or winding up of
Venturi, the assets to be distributed among the holders of the Series A
Preferred Stock are insufficient to permit the payment to such holders of the
full amount of the liquidation preference, then the entire assets of Venturi
legally available for distribution shall be distributed with equal priority and
pro rata among the holders of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock in proportion to the numbers of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
held by them. After payment of the full $10.00 liquidation preference plus any
accumulated and unpaid dividends, the holders of the Series A Preferred Stock
will not share in any other assets of Venturi distributed to holders of equity
securities.
Venturi has the option to call the Series A Preferred Stock for redemption at
any time. The price paid to the holders of the Series A Preferred Stock by
Venturi for any such redemption shall equal $11.00 per share plus any accrued or
unpaid dividends to the date of the call for redemption. Such redemption price
shall, at the option of the holder of the shares, either be paid in cash or in
Common Stock at a conversion rate of 1.093585771 shares of Common Stock for each
share of Series A Preferred Stock.
The holders of the Series A Preferred Stock have the right to convert any or all
of such shares into shares of Common Stock at a conversion ratio of 1.093585771
shares of Common Stock for each share of Series A Preferred Stock. The
conversion option may be exercised at any time, except that if the Series A
Preferred Stock is called for redemption, the conversion rights pertaining
thereto terminate at the close of business on
34
<PAGE> 40
the date fixed for redemption unless Venturi defaults on the payment of the
redemption price plus accumulated and unpaid dividends. All shares of Series A
Preferred Stock shall automatically be converted into shares of Common Stock at
a conversion ratio of 1.09358571 shares of Common Stock for one share of Series
A Preferred Stock prior to the consummation of a firmly underwritten public
offering of Venturi's Common Stock.
Venturi is required to reserve and keep available out of its authorized but
unissued shares of Common Stock such number of shares of Common Stock as shall
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock. The holders of the Series A Preferred Stock have no
demand registration rights. Holders of Series A Preferred Stock, voting as a
class, are entitled to piggyback registration rights with respect to any
securities registration undertaken by Venturi, subject to the right of Venturi
to reduce the number of shares, including to zero, which are proposed to be
registered on behalf of holders of the Series A Preferred Stock pro rata in view
of market conditions.
Each holder of Series A Preferred is entitled to the number of votes equal to
the number of shares of Common Stock into which such shares of Series A
Preferred Stock are convertible (without regard to any fractional shares
issuable upon such conversion), and they are entitled to vote on all matters on
which the Common Stock is entitled to vote, unless otherwise required by
applicable law or in cases where the rights and privileges of the Common
Stockholders may be altered or diminished. The holders of the Series A Preferred
Stock are entitled to notice of stockholders meetings in accordance with
Venturi's bylaws.
Without the prior consent of a majority of the total number of shares of the
Series A Preferred Stock and Common Stock then outstanding, Venturi may not (a)
alter or change the rights, preferences or privileges of the Series A Preferred
Stock materially or adversely; or (b) increase the authorized number of shares
of Series A Preferred Stock; or (c) create any new class of shares having
rights, preferences or privileges senior to the Series A Preferred Stock holders
as to dividend rights, redemption rights or liquidation rights.
SERIES B PREFERRED. Venturi authorized the issuance of up to 315,000 shares of
Series B Preferred Stock by resolution dated December 24, 1997. As of June 30,
1998, there were 260,000 shares of Series B Preferred Stock outstanding. The
Series B Preferred Stock is entitled to receive cumulative quarterly cash
dividends at the annual rate of 6% per annum, payable by issuance of shares of
Venturi's Common Stock, based on the thirty (30) day average closing bid price
of the Common Stock prior to the dividend date. If there is no trading in the
Common Stock for thirty (30) days prior to the dividend date, the dividend shall
be calculated using a value of the Common Stock of $5.00 per share. As of June
30, 1998, no shares of Common Stock had been issued to the holders of the Series
B Preferred Stock as dividends. As long as shares of the Series B Preferred
Stock are outstanding, if Venturi is in default or in arrears in respect to the
payment of dividends on the Series B Preferred Stock or any stock subsequently
issued that is of equal priority to the Series B Preferred Stock, Venturi may
not declare, pay or set apart any funds for the payment of dividends,
redemption, repurchase, retirement or sinking fund payments on any of the Common
Stock. The Series B Preferred Stock has equal priority with the Series A
Preferred Stock and the Series C Preferred Stock with respect to the payment of
dividends.
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<PAGE> 41
In the event of any liquidation, dissolution or winding up of Venturi, either
voluntary or involuntary, the holders of the Series B Preferred Stock shall be
entitled to receive, after all debts are paid, out of the assets of Venturi, the
sum of $10.00 per share plus an amount equal to all accumulated and unpaid stock
dividends thereon to the date fixed for liquidation, dissolution or winding up,
before any payment may be made or any assets distributed to the holders of
Common Stock. If, upon any such liquidation, dissolution or winding up of
Venturi, the assets to be distributed among the holders of the Series B
Preferred Stock are insufficient to permit the payment to such holders of the
full amount of the liquidation preference, then the entire assets of Venturi
legally available for distribution shall be distributed with equal priority and
pro rata among the holders of the Series A, B and C Preferred Stock in
proportion to the numbers of Preferred Stock held by them. After payment of the
full $10.00 liquidation preference plus any accumulated and unpaid dividends,
the holders of the Series B Preferred Stock will not share in any other assets
of Venturi distributed to holders of equity securities.
The holders of the Series B Preferred Stock have the right to convert any or all
of such shares into shares of Common Stock at a conversion ratio of 5 shares of
Common Stock for each share of Series B Preferred Stock, adjusted to take into
account any unpaid dividends.
Venturi is required to reserve and keep available out of its authorized but
unissued shares of Common Stock such number of shares of Common Stock as shall
be sufficient to effect the conversion of all then outstanding shares of the
Series B Preferred Stock. Holders of Series B Preferred Stock have no voting
rights, except that for a period of five (5) years from the original issue date
or December 31, 1997, the holders of the Series B Preferred Stock have the right
to designate one member of the Board of Directors, and Venturi agrees to cause
such designee to be elected to the Board. The holders of the Series B Preferred
Stock have not exercised such designation right. As a result of the conversion
of the Series B Preferred Stock in connection with the Offering, the Series B
Preferred Stock will be canceled, and this right of designation will terminate.
Without the prior consent of a majority of the total number of shares of the
Series B Preferred Stock and Common Stock then outstanding, Venturi may not (a)
alter or change the rights, preferences or privileges of the Series B Preferred
Stock materially or adversely; or (b) increase the authorized number of shares
of Series B Preferred Stock; or (c) create any new class of shares having
rights, preferences or privileges senior to the Series B Preferred Stock holders
as to dividend rights, redemption rights or liquidation rights.
The Series B Preferred Stock will be converted into Common Stock, surrendered
and canceled as a result of the Offering. Therefore, after consummation of the
Offering, there will be no Series B Preferred Stock outstanding.
SERIES C PREFERRED. Venturi authorized the issuance of up to 1,000,000 shares of
Series C Preferred Stock by resolution dated July 28, 1998. As of June 30, 1998,
there were 372,862 shares of Series C Preferred Stock outstanding. The Series C
Preferred Stock was created for issuance pursuant to a Stock Purchase Agreement
dated as of April 10, 1998, between Venturi and CDL Capital Corp.(now known as
Invest Linc Capital Corp., a Nevada corporation) and CDL Emerging Growth Equity
Fund I, L.L.C. (now known as Invest Linc Emerging Growth Equity Fund I, L.L.C.,
a Nevada limited liability company). These
36
<PAGE> 42
entities paid $2.05 per share for the Series C Preferred Stock. CDL Capital
Corp. has been granted an option to acquire up to 414,634 additional shares of
Series C Preferred Stock; and CDL Emerging Growth Equity Fund has been granted
an option to acquire an additional 536,585 shares of the Series C Preferred
Stock. For every two shares of Series C Preferred Stock purchased by CDL
Capital, CDL Capital has a warrant to acquire one share of Common Stock at a
price of $2.05 per share.
The Series C Preferred Stock is entitled to receive, when and as declared by the
Board, out of funds legally available for the payment of dividends, cumulative
quarterly cash dividends at the annual rate of 6% per annum, payable quarterly
in cash or in the equivalent number of shares of Common Stock, at the rate of
$2.05 per share.
Venturi is required to reserve and keep available out of its authorized but
unissued shares of Common Stock such number of shares of Common Stock as shall
be sufficient to effect the conversion of all then outstanding shares of the
Series C Preferred Stock. The Series C Preferred Stock is convertible into
Common Stock of Venturi on a share for share basis, at any time. The holders of
the Series C Preferred Stock have the right to piggyback on any registration of
Company Common Stock. Holders of Series C Preferred Stock have no voting rights.
Without the prior consent of a majority of the total number of shares of the
Series C Preferred Stock and Common Stock then outstanding, Venturi may not (a)
alter or change the rights, preferences or privileges of the Series C Preferred
Stock materially or adversely; or (b) increase the authorized number of shares
of Series C Preferred Stock; or (c) create any new class of shares having
rights, preferences or privileges senior to the Series C Preferred Stock holders
as to dividend rights, redemption rights or liquidation rights.
CONVERSION OF PREFERRED STOCK. There is presently a dividend accumulation of
$32,064 with respect to the Series A Preferred Stock, and stock dividends of
2,870 shares of Common Stock, with respect to the Series B Preferred Stock. As
part of the Offering, the holders of the Series B Preferred Stock, and the
Series C Preferred Stock have agreed to sell their Preferred Stock and surrender
their accumulated rights to dividends and certain registration rights to Venturi
in consideration of the issuance by Venturi of Common Stock being registered in
this Offering. The Common Stock issued to the holders of Preferred Stock will be
freely tradeable. Because the holders of the Preferred Stock will collectively
own 28.7% of the Common Stock after completion of the Offering, their sales
could have an adverse effect on the market price for the Common Stock. See "Risk
Factors--Price Fluctuations". Venturi has received assurances that the former
Series B Preferred Stock holders do not intend to sell their shares within 90
days after completion of the Offering; however, such assurances are not in
writing, and therefore may not be enforceable. Venturi cannot guarantee that the
former holders of Series B Preferred Stock will not immediately sell the Common
Stock received in the Offering. The Series C Preferred Stock holders have signed
a Lock-up Agreement. See "Shares Eligible For Future Sale." After completion of
the Offering, there will be no outstanding Series B or Series C Preferred Stock.
Venturi will continue to have 64,410 shares of Series A Preferred Stock
outstanding.
37
<PAGE> 43
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offer and sale of the shares offered hereby, Venturi will
have outstanding 6,707,666 shares of Common Stock. All shares of Common Stock
sold in this Offering will be freely tradable without restrictions under the
Securities Act.
Of the 4,752,804 shares of Common Stock currently outstanding, all but 476,000
are "restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act, and may not be sold except in compliance with the registration
requirements of the Securities Act or an applicable exemption under the
Securities Act, including an exemption pursuant to Rule 144 thereunder. The
Common Stock held by Gaylord Karren and John Hopkins is subject to a Lockup
Agreement dated December 31, 1997, pursuant to which these stockholders agree
not to sell any of their Common Stock prior to May 31, 1999, unless the Common
Stock trades at an average price of $10.00 per share for 30 days on trading
volume of at least 15,000 shares. In that case, up to 1,000 shares of Common
Stock may be released from the restriction per week. As noted above, the Series
C Preferred Stockholders have signed a Lockup Agreement, in which they have
agreed not to sell the Common Stock received in this Offering until May 31,
1999, except for Common Stock that may be released if the Common Stock trades at
an average price of $10.00 per share for 30 days on trading volume of at least
15,000 shares.
In general, under Rule 144 as currently in effect, any affiliate of Venturi and
any person (or persons whose sales are aggregated) who has beneficially owned
his or her restricted shares for at least one year, is entitled to sell in the
open market within any three-month period a number of shares of Common Stock
that does not exceed the greater of (i) 1% of the then outstanding shares of
Venturi's common stock, or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain limitations on manner of sale, notice requirements,
and availability of current public information about Venturi. Non-affiliates of
Venturi who have held their restricted shares for one year are entitled to sell
their shares under Rule 144 without regard to any of the above limitations,
provided they have not been affiliates for the three months preceding such sale.
Further, Rule 144A as currently in effect, in general, permits unlimited resales
of certain restricted securities of any issuer provided that the purchaser is an
institution that owns and invests on a discretionary basis at least $100 million
in securities or is a registered broker-dealer that owns and invests $10 million
in securities. Rule 144A allows the existing stockholders of Venturi to sell
their shares of Common Stock to such institutions and registered broker-dealers
without regard to any volume or other restrictions. Unlike under Rule 144,
restricted securities sold under Rule 144A to nonaffiliates do not lose their
status as restricted securities.
As a result of the provisions of Rule 144, all of the restricted securities
could be available for sale in the public market beginning 90 days after the
date of this Prospectus.
Prior to this offering, no public market for Venturi's securities has existed,
although the Common Stock is quoted on the OTC Bulletin Board. Following this
offering, no predictions can be made of the effect, if any,
38
<PAGE> 44
of future public sales of restricted securities or the availability of
restricted securities for sale in the public market. Moreover, Venturi cannot
predict the number of shares of Common Stock that may be sold in the future
pursuant to Rule 144 because such sales will depend on, among other factors, the
market price of the Common Stock and the individual circumstances of the holders
thereof. The availability for sale of substantial amounts of Common Stock under
Rule 144 could adversely affect prevailing market prices for Venturi's
securities.
PLAN OF DISTRIBUTION
Venturi is offering to sell, on a best efforts basis, up to 32,000 (subject to
change) newly issued shares of its Common Stock at $______________ per share.
This Offering is being made directly by Venturi through written announcements,
under the direction of Gaylord Karren, Venturi's Chairman and CEO. Venturi will
publish announcements of the offering, and will mail copies of the announcement
to its stockholders, customers and inquirers. The announcements will provide the
very limited information permitted under applicable securities laws and will
give Venturi's telephone number, mailing address and e-mail address for
requesting this Prospectus. Similar announcements will be published in other
selected media and mailed to other selected individuals. Assistance in
connection with the offering will be available from the selling agents, if any;
from Gaylord Karren, CEO of Venturi; and from Joe Fox, Venturi's Stockholder
Relations Coordinator.
Compensation will be paid only to any registered securities broker-dealer
selected by Venturi as a selling agent, and then only as a percent of the
offering price. No compensation related to sales of shares will be paid to any
employees of Venturi. Venturi will indemnify the selling agents against
liabilities for claimed misstatements or omissions in this Prospectus.
Only residents of those states in which the Common Stock offered hereby has been
qualified for sale under applicable securities or Blue Sky laws may purchase
shares in this offering.
Shares may be purchased by mailing or delivering a check for the purchase price
to Venturi, at its headquarters in Orem, Utah. Within 10 days after its receipt
of a check for the purchase price, Venturi will send a written confirmation to
notify the subscriber of the extent, if any, to which such subscription has been
accepted by Venturi.
The offering will begin on the date of this Prospectus and continue until either
all of the Common Stock has been sold or Venturi terminates the offering.
AVAILABLE INFORMATION
Venturi Technologies, Inc., a Nevada corporation (the "Company") has filed with
the Commission a Registration Statement on Form SB-2 (Registration No.
___________ ) under the Securities Act for the registration of the shares of
Common Stock offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement and
39
<PAGE> 45
exhibits and schedules thereto for further information with respect to Venturi
and the securities to which this Prospectus relates. Statements made herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference. Items of information omitted from this Prospectus
but contained in the Registration Statement may be inspected without charge at
the Public Reference Room of the Commission, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, at prescribed rates.
Upon consummation of the offering of the Common Stock, Venturi will become
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith will file reports and other
information with the Commission. Such reports and other information can be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
New York Regional Office, 26 Federal Plaza, New York, New York 10007, and its
Chicago Regional Office, Everett McKinley Dirksen Building, 219 South Dearborn
Street, Room 1204, Chicago, Illinois 60604. Copies of such material can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549, at prescribed rates. The Commission also makes electronic filings
publicly available on the Internet within 24 hours of acceptance. The
Commission's Internet address is http://www.sec.gov. The Commission web site
also contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the Commission.
Venturi intends to deliver annual reports to the holders of its securities which
will contain, among other information, audited financial statements examined and
reported upon by its independent certified public accountants.
40
<PAGE> 46
INDEX TO FINANCIAL STATEMENTS
1. Venturi Technologies, Inc.
Unaudited Consolidated Income Statement
Six Months Ended June 30, 1998..................................... F-2
2. Venturi Technologies, Inc.
Unaudited Consolidated Balance Sheet
Six Months Ended June 30, 1998..................................... F-4
3. Venturi Technologies, Inc.
Audited Consolidated Financial Statements
Years Ended December 31, 1997 and 1996
with Report of Independent Auditors................................ F-6
F-1
<PAGE> 47
Venturi Technologies, Inc.
Unaudited Consolidated Income Statement
Six Months Ended June 30, 1998
<TABLE>
<S> <C> <C>
REVENUES:
Carpet and Restoration 2,203,718.11
Customer Refunds - 1,899.55
------------
TOTAL REVENUES 2,201,816.56
------------
NET REVENUES 2,201,818.56
------------
COST OF GOODS SOLD:
Restoration 352,290.88
Carpet Wages 515,225.41
Fuel and Oil 68,256.36
Contract Labor 2,978.56
------------
TOTAL COST OF GOODS SOLD 938,751.21
------------
GROSS PROFIT 1,263,067.35
------------
OPERATING EXPENSES:
Health Insurance 13,210.91
Contract Labor 14,311.82
Base Salaries 242,199.98
Equipment Repair 4,403.64
Machinery Repair 3,302.73
Vehicle Repair 6,605.45
Fuel and Oil 6,615.09
Shop Supplies 55,045.45
Travel 4,183.45
Chemicals 6,825.64
Marketing/Promotion 8,366.91
Advertising 11,009.09
Office Supplies 5,944.91
Utilities 10,568.73
Pagers/Radios 14,972.36
Uniforms 9,247.64
Shop Rent 41,834.54
Telephone 28,623.63
Payroll Taxes 55,045.45
Vehicle Insurance 46,238.18
Vehicle Lease 2,739.26
Other 378.56
Personal Property Taxes 7,546.04
Freight 15,412.73
</TABLE>
F-2
<PAGE> 48
<TABLE>
<S> <C> <C>
Auto Licensing 8,167.51
Leased Equipment 398.56
Dues & Subscriptions 4,868.28
Bank Charges 4,623.82
Commissions 7,895.66
Operating Costs of Video-Air 245,862.50
Operating Costs of All Valley 132,387.45
Miscellaneous 4,188.44
Depreciation 77,063.63
------------
TOTAL OPERATING EXPENSES 1,100,088.04
------------
INCOME BEFORE G&A 162,979.31
G&A EXPENSES:
Depreciation 43,138.77
Contract Labor 71,897.75
Mid Management Salaries 330,272.70
Management Fees 95,478.43
Travel-Accommodations 14,375.55
Travel-Airfare 78,759.10
Travel-Meals 2,422.78
Travel-Transportation 43,138.65
Marketing 132,109.08
Advertising 46,238.18
Office Supplies 12,984.66
Utilities 22,018.29
Rent 63,861.55
Telephone 60,492.78
Liability Insurance 52,666.80
Interest 49,512.56
Leased Equipment 2,240.02
Accounting Fees 29,479.10
Amortization 6,605.45
Bank Charges 4,183.45
Consulting Fees 67,063.63
Legal Fees 90,388.54
Factoring Fees 19,816.36
Contributions 2,000.00
Training 7,706.36
Compliance Fees 12,459.71
------------
TOTAL G&A EXPENSES 1,361,310.25
------------
NET PROFIT -1,198,330.94
------------
</TABLE>
F-3
<PAGE> 49
Venturi Technologies, Inc.
Unaudited Consolidated Balance Sheet
Six Months Ended June 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Current Assets
Bank of America Fork 90,583.55
T-Co Manufacturing 113.66
Orem Community Bank 641.37
Whisperwood 839.07
Western Community Bank 1,221.74
Petty Cash 200.00
Accounts Receivable 409,703.59
Accounts Receivable-Factored -240,824.13
Factored Receivable-Reserve 32,249.83
Deposits 32,061.32
WIP Inventory-Restoration 37,635.00
N/R - Primacide 1,494.00
------------
Total Current Assets 365,919.00
Fixed Assets
Machinery & Equipment 441,673.92
Machinery & Equipment Phase 7 18,112.38
Capital Lease Equipment 940,000.67
Office Furniture 752.35
Hand Tools 3,281.57
Computers and Office Equipment 40,095.02
Computer Software 9,818.44
Vehicles 384,404.66
Buildings 209,500.00
Land 20,000.00
Less: Accumulated Depreciation -753,896.57
Assets Acquisitions 124,235.17
------------
Total Fixed Assets 1,437,977.61
Other Assets:
Organizational Costs 69,827.00
------------
Total Other Assets 69,827.00
TOTAL ASSETS 1,873,723.61
------------
</TABLE>
F-4
<PAGE> 50
<TABLE>
<S> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable 337,339.61
Accrued Wages 76,245.40
Preferred Dividends 2,390.00
Note Payable-James Stone 11,800.00
Current Portion of Long Term Debt 178,491.49
Federal Taxes Payable 1,256.83
FICA Taxes 1,283.90
Payroll Taxes Payable 1,283.90
State Taxes Payable 480.56
-------------
Total Current Liabilities 610,571.69
Long Term Liabilities
Notes Payable-Equipment 777,383.05
Notes Payable-Banks 29,383.02
Notes Payable-Land/Buildings 253,717.83
Notes Payable-Officers/Employees 453,174.00
Notes Payable-Protech Acquisition 90,269.66
-------------
Total Long-Term Liabilities 1,604,348.56
------------
TOTAL LIABILITIES 2,214,920.25
EQUITY
Common Stock 1,658,217.00
Preferred Stock 2,603,934.00
Additional Paid-in-Capital 19,489.00
Preferred Stock Subscription Receivable -42,648.00
Retained Earnings -3,381,857.70
Year-to-date Earnings -1,198,330.94
-------------
TOTAL EQUITY -341,196.64
------------
TOTAL LIABILITIES AND EQUITY 1,873,723.61
------------
</TABLE>
F-5
<PAGE> 51
VENTURI TECHNOLOGIES, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
F-6
<PAGE> 52
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
CONTENTS
Report of Independent Auditors............................................... 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets.................................................. 2
Consolidated Statements of Operations........................................ 3
Consolidated Statements of Stockholders' Equity (Deficit).................... 4
Consolidated Statements of Cash Flows........................................ 5
Notes to Consolidated Financial Statements................................... 6
F-7
<PAGE> 53
CHILD & COMPANY
- ---------------
A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
265 EAST 100 SOUTH, SUITE 300, SALT LAKE CITY, UT 84111
PHONE: (801) 534-0774 FAX: (801) 359-2320
INDEPENDENT AUDITORS' REPORT
Shareholders and Officers
Venturi Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Venturi
Technologies, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Venturi
Technologies, Inc. as of December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
May 19, 1998
F-8
<PAGE> 54
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1997 1996
----------- -----------
ASSETS (Restated - Note J)
<S> <C> <C>
Current assets
Cash and cash equivalents - Note C $ 7,379 $ 4,181
Accounts receivable, net of allowance of $27,000
in 1997 and 1996 71,628 82,992
Other current assets 18,257 4,063
----------- -----------
Total current assets 97,264 91,236
Fixed assets
Capital lease equipment 352,161 170,476
Machinery and equipment 336,019 340,066
Computer and office equipment 46,911 14,150
Automobiles and trucks 454,484 368,904
Buildings 209,500 283,000
Land 20,000 20,000
----------- -----------
Total fixed assets 1,419,075 1,196,596
Less accumulated depreciation 579,912 392,390
----------- -----------
Net fixed assets 839,163 804,206
Other assets
Unamortized debt issue costs, net of accumulated
amortization of $38,978 and $19,489 58,468 77,957
----------- -----------
Total assets $ 994,895 $ 973,399
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 351,890 $ 216,397
Checks drawn in excess of bank balance 28,950 20,696
Accrued liabilities 297,919 154,786
Bank line-of-credit - Note B 29,804 29,199
Notes payable to stockholders - Note B 157,851 33,275
Current portion long term debt and capital leases 370,855 229,387
Notes payable to employees - Note B -- 8,800
----------- -----------
Total current liabilities 1,237,269 692,540
Long-term liabilities - Note C
Notes payable - stockholders 443,359 461,292
Capital lease obligations 170,108 117,335
Notes payable to banks and vehicle finance companies 247,668 310,201
Notes payable - other 52,049 122,706
----------- -----------
Total long-term liabilities 913,184 1,011,534
Commitments and contingencies - Note I -- --
Stockholders' equity (deficit) - Note D
Preferred stock, -Series A & B, $.001 par value, cumulative,
convertible, 5,000,000 shares authorized, 269,410 and 39,560
shares issued and outstanding 269 39
Common stock, $.001 par value, 20,000,000 shares authorized,
4,455,121 and 2,582,618 shares issued and outstanding 4,454 2,582
Additional Paid-in capital 4,511,690 851,412
Retained earnings (deficit) (4,801,971) (1,584,708)
Preferred stock subscription receivable (870,000) --
----------- -----------
Total stockholders' equity (deficit) (1,155,558) (730,675)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 994,895 $ 973,399
=========== ===========
</TABLE>
See notes to financial statements
F-9
<PAGE> 55
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
----------- -----------
<S> <C> <C>
Revenues: (Restated - Note J)
Carpet cleaning $ 1,058,033 $ 674,750
Damage restoration revenues 1,102,529 1,323,585
----------- -----------
2,160,562 1,998,335
Expenses:
Carpet cleaning costs 322,004 339,859
Damage restoration costs 600,766 657,359
Advertising 117,231 71,054
Other selling, general & administrative 3,946,426 1,978,007
Depreciation expense 215,503 139,665
Interest 121,085 89,708
----------- -----------
Total expenses 5,323,015 3,275,652
----------- -----------
Net (loss) from continuing operations before
income tax benefit (3,162,453) (1,277,317)
Income tax expense benefit - continuing operations -- 66,537
----------- -----------
Net (loss) from continuing operations (3,162,453) (1,210,780)
Net income from discontinued operations
(less applicable income taxes of $14,346) - Note F -- 62,408
----------- -----------
Net (loss) $(3,162,453) $(1,148,372)
=========== ===========
Per share amounts (basic and diluted):
Net loss from continuing operations $ (.79) $ (.52)
Net income from discontinued operations $ -- $ .03
----------- -----------
Net (loss) $ (.79) $ (.49)
=========== ===========
Shares used in computing per share amounts 4,068,784 2,341,962
=========== ===========
</TABLE>
See notes to financial statements
F-10
<PAGE> 56
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Common Stock (Series A & B) Subscription
Shares Amount Shares Amount Receivable
----------- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1996 1,818,583 $ 1,818 -- $ -- $ --
Common stock issued
for cash 63,169 63 -- -- --
Common stock issued
in lieu of interest 700,866 701 -- -- --
Preferred stock issued
for cash -- -- 38,850 38 --
Preferred stock issued
for services -- -- 710 1 --
Preferred stock dividends
paid or accrued -- -- -- -- --
Net loss -- -- -- -- --
----------- ------- --------- -------- -----------
Balances at
January 1, 1997 2,582,618 2,582 39,560 39 --
Common stock issued
for cash 1,830,268 1,830 -- -- --
Compensatory stock
options issued at less
than fair value - Note D -- -- -- -- --
Common stock issued
in lieu of wages and
rent, etc 42,235 42 -- -- --
Preferred stock issued
for cash -- -- 198,850 199 (870,000)
Preferred stock issued
for services and fees -- -- 31,000 31 --
Preferred stock dividends
paid or accrued -- -- -- -- --
Net loss -- -- -- -- --
----------- ------- --------- -------- -----------
Balances at
December 31, 1997 4,455,121 $ 4,454 269,410 $ 269 $ (870,000)
=========== ======= ========= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
Additional Retained
Paid-in Earnings
Capital (deficit) Total
----------- ----------- -----------
<S> <C> <C> <C>
Balances at (Restated - Note J)
January 1, 1996 $ 229,821 $ (426,446) $ (194,807)
Common stock issued
for cash 129,285 -- 129,348
Common stock issued
in lieu of interest 96,745 -- 97,446
Preferred stock issued
for cash 388,462 -- 388,500
Preferred stock issued
for services 7,099 -- 7,100
Preferred stock dividends
paid or accrued -- (9,890) (9,890)
Net loss -- (1,148,372) (1,148,372)
----------- ----------- -----------
Balances at
January 1, 1997 851,412 (1,584,708) (730,675)
Common stock issued
for cash 839,114 -- 840,944
Compensatory stock
options issued at less
than fair value - Note D 1,396,000 -- 1,396,000
Common stock issued
in lieu of wages and
rent, etc 151,894 -- 151,936
Preferred stock issued
for cash 1,118,301 -- 248,500
Preferred stock issued
for services and fees 154,969 -- 155,000
Preferred stock dividends
paid or accrued -- (54,810) (54,810)
Net loss -- (3,162,453) (3,162,453)
----------- ----------- -----------
Balances at
December 31, 1997 $ 4,511,690 $(4,801,971) $(1,155,558)
=========== =========== ===========
</TABLE>
See notes to financial statements
F-11
<PAGE> 57
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (Restated - Note J)
Net loss $(3,162,453) $(1,148,372)
Adjustments to reconcile net loss to net cash used in operating
activities:
Provision for losses on accounts receivable -- 87,000
Provision for write-down of other assets -- 58,442
Gain on disposal of property (82,228) --
Preferred stock issued for services and fees 155,000 --
Common stock issued in lieu of wages and rent 151,936 --
Compensatory options 1,396,000 --
Depreciation and amortization 215,503 153,165
Changes in operating assets and liabilities:
Accounts receivable 11,364 (40,019)
Other current assets (14,194) (3,423)
Accounts payable and accrued liabilities 260,710 269,588
Debt service costs 19,489 19,489
Checks drawn in excess of bank balance 8,254 20,696
Deferred taxes -- (49,843)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,040,619) (633,277)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and other fixed assets (81,499) (35,229)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (81,499) (35,229)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds form bank line-of-credit 605 --
Proceeds from notes payable and capital lease obligations 228 69,291
Proceeds from notes payable to stockholders 261,105 154,975
Payments on notes payable and capital lease obligations (146,485) (123,916)
Payments on notes payable to stockholders (33,887) (10,512)
Payments on notes payable to employees (8,800) --
Issuances of common stock for cash 840,944 129,347
Issuances of preferred stock for cash 248,500 395,600
Payment of cash dividends on preferred stock (36,893) (938)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,125,317 602,856
----------- -----------
NET INCREASE (DECREASE) IN CASH 3,198 (54,659)
Cash at Beginning of Year 4,181 58,840
----------- -----------
CASH AT END OF YEAR $ 7,379 $ 4,181
=========== ===========
SUPPLEMENTAL DISCLOSURES
Schedule of non-cash investing and financing activities:
Issuance of common stock representing unamortized
debt issuance costs $ -- $ 77,957
Notes payable and capital lease obligations entered into
to acquire equipment and other fixed assets $ 221,746 $ 264,999
Preferred stock dividends accrued but not paid $ 17,917 $ 8,952
Reduction of notes payable via sale of property $ 140,000 $ --
Subscription receivable $ 870,000 $ --
Cash interest paid $ 103,150 $ 70,001
</TABLE>
See notes to financial statements
F-12
<PAGE> 58
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
The summary of significant accounting policies of Venturi Technologies, Inc.
(the Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
BUSINESS ACTIVITY
Venturi Technologies, Inc. (the Company, formerly HiTek Carpet Care, Inc.) was
formed on January 30, 1997 in Nevada for the purpose of acquiring carpet
cleaning and damage restoration service companies. The formation was effected
with the issuance of 1,500,000 shares of common stock for $150,000. On June 30,
1997, the Company entered into a stock- for-stock agreement and plan of
reorganization between HiTek Carpet Care, Inc. (HiTek) and Venturi Technologies,
Inc. (Venturi). The combined company's business purpose is to provide carpet
cleaning services for residential, commercial and multi-family locations
throughout the U.S., and to manufacture carpet cleaning equipment and chemicals.
Pursuant to the stock-for-stock exchange agreement, HiTek issued 2,807,714
additional shares of its common stock in exchange for all outstanding common
shares of Venturi. Also, as part of the exchange, HiTek issued 64,410 shares of
its Series A preferred, $.001 par value, 10% cumulative, convertible, and voting
stock for all 64,410 shares of Venturi preferred, no par value cumulative
convertible non-voting stock. As a result of the exchange, the former Venturi
shareholders attained ownership and voting control over the combined entity
equal to approximately 66% and Venturi became a wholly-owned subsidiary of
HiTek. Accordingly, the combination has been accounted for as a reverse
stock-for-stock acquisition under the purchase method of accounting.
Substantially all of the business activities and purposes of Venturi will
continue. Concurrent with the exchange, HiTek changed its name to Venturi
Technologies, Inc.
Prior to June 30, 1997, the only transactions of HiTek have been related to
organizational and start up activities and only immaterial liabilities existed.
Accordingly, the financial statements present the historical financial position
and results of operations and retained earnings of Venturi and no goodwill has
been recorded. In what is regarded as a recapitalization, the historical
stockholders equity of Venturi has been retroactively restated for the
equivalent number of shares received in the exchange after giving effect to
differences in par value. Costs associated with the business combination have
been charged to operations of the combined entity (Venturi Technologies, Inc.).
Venturi was organized and began business in 1992. Prior to the acquisition,
Venturi had obtained its growth through a series of mergers with companies
engaged in substantially the same business. Accordingly, the Company's
consolidated financial statements include not only those of HiTek but also the
operations of the combined entities. All inter-company transactions have been
eliminated in consolidation.
The names of the entities combined with Venturi and a brief description of each
follows:
F-13
<PAGE> 59
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)
- T-Co Carpet Cleaning and T-Co Heating Systems - a carpet cleaning
business and manufacturer of heaters used in carpet cleaning
equipment. The acquisition took place in 1996.
- Protech, Inc. (Stone Maintenance) - a carpet cleaning and flood
damage restoration business, acquired in December, 1996.
- Preferred Carpet Care - a carpet cleaning business, acquired in
March, 1996.
- Dependable Carpet Cleaning - another carpet cleaning business
acquired in January, 1996.
A total of 232,706 shares of $.001 par value common stock have been issued in
connection with the combinations.
Results of operations of the previously separate enterprises for the period
prior to the mergers are summarized as follows:
<TABLE>
<S> <C>
Revenues $ 864,198
Net Loss $ 108,165
</TABLE>
These mergers have been treated as pooling-of-interest business combinations
wherein the operating results of each combined entity have been included in the
financial statements as though the enterprises had been combined as of the
beginning of each year. The combined enterprise has recorded assets and
liabilities in conformity with generally accepted accounting principles.
Expenses related to the mergers have been deducted from resulting net income.
There were no adjustments to net assets of any of the combined enterprises to
comply with or adopt the same accounting principles or the same fiscal years.
Under the pooling-of-interests method of accounting the retained earning
accounts of all enterprises have been combined.
REVENUE RECOGNITION
The Company records revenues as services are performed and as the customer is
billed or payment received.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments with a maturity
of three months or less to be cash equivalents.
FIXED ASSETS
Depreciable fixed assets are stated at cost and depreciated using the
straight-line method based on estimated useful lives. Amortization of assets
under capital leases has been included in depreciation expense.
F-14
<PAGE> 60
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)
ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets and liabilities as well as footnote disclosures
included in the financial statements. Significant estimates relating to debt
issuance costs (see note D), allowances for bad debts, income taxes (see note
G), and compensatory stock options (see Note D) have been included in the
financial statements. Actual amounts could differ from those reported.
ADVERTISING COSTS
The Company expenses the costs of advertising as incurred. Advertising expenses
aggregated $117,231 in 1997, and $71,054 in 1996.
TAXES BASES ON INCOME
Deferred taxes are provided for items recognized in different periods for
financial and tax reporting purposes in accordance with Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes.
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common share
outstanding during the period presented.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No 128, Earnings Per Share.
The Statement simplifies the standards for computing earnings per share ("EPS"),
and requires the presentation of both basic and diluted EPS on the face of the
statement of earnings with supplementary disclosures. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997. The
Company has adopted the provisions of SFAS no. 128 in its 1997 and 1996
financial statements. A reconciliation of factors entering into the computation
of basic versus diluted earnings per-share is not necessary due to the
anti-dilutive effect of any potential common shares on net loss per share.
LONG-LIVED ASSETS
In 1996, the Company adopted SFAS 121, Accounting for the impairment of
Long-Lived Assets and of Long-Lived Assets to be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations or that
are expected to be generated by those assets are less than the carrying value of
the assets. There were no impairment losses recorded in 1997 or 1996 as the
result of adopting SFAS 121.
STOCK OPTIONS
In October 1995, the FASB issued SFAS 123, Accounting for Stock-Based
Compensation. As permitted by SFAS 123, the Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations ("APB 25"), in accounting for
stock-based awards to employees, and has made any proforma disclosures required
by SFAS 123. Under APB 25, the Company has recorded compensation expense with
respect to the issuance of certain compensatory non-qualified options (see Note
D). In addition, the Company has made certain other disclosures under SFAS 123
regarding pro-forma net loss and net loss per share amounts using the fair value
method of valuing compensatory stock options.
F-15
<PAGE> 61
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)
RECENTLY ISSUED PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS 130 is effective for fiscal years beginning after December 15, 1997. The
Company will adopt SFAS 130 during the first quarter of 1998, and does not
expect the impact to be material.
In June 1997, the FASB issued SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. The Statement requires public business
enterprises to report certain information about operation of segments in
complete sets of financial statements of the enterprise and in condensed
financial statements of interim periods issued to shareholders. It also requires
that public business enterprises report certain information about their products
and services, the geographic areas in which they operate, and their major
customers. SFAS 131 will be effective for fiscal years beginning after December
15, 1997. The Company will adopt SFAS 131 in 1998.
CREDIT RISK
The Company's customers include individuals and companies that may be affected
by changing economic conditions.
The Company "sells" its accounts receivable to a factoring company which pays up
to 80% of current receivables immediately and retains 16% of all current
receivables sold in reserve against future bad debts. The factoring company
charges a fee of 4% to 8% of receivables submitted. The Company may be at risk
for receivables that have been sold but not yet collected by the factoring
company. At December 31, 1997 and 1996, this totaled approximately $98,101 and
$58,586 (net of reserve), respectively.
RECLASSIFICATION
Certain 1996 amounts have been reclassified to conform with the 1997
presentation.
B. NOTES PAYABLE
Short-term notes payable and the carrying value of collateral at December 31,
1997 and 1996 is as follows:
F-16
<PAGE> 62
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Net Carrying Value Note Balance at Note Balance at
of Collateral December 31, 1997 December 31, 1996
------------------ ----------------- -----------------
<S> <C> <C> <C>
Notes payable to shareholders, no stated
interest due on demand, unsecured $ -- $157,851 $ 33,275
Notes payable to employees, non-interest
bearing, due on demand, unsecured -- -- 8,800
Bank revolving line-of-credit, $30,000
limit, at 11% interest annually for
working capital -- 29,804 29,199
-------- -------- --------
$ 0 187,655 $ 71,274
======== ======== ========
</TABLE>
C. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
Net Carrying Value Note Balance at Note Balance at
of Collateral December 31, 1997 December 31, 1996
------------------ ----------------- -----------------
<S> <C> <C> <C>
Notes payable to shareholders, interest from (Restated - Note J)
8.91% to 17.11%, monthly payments of
$231 to $2,500 and balloon payments
due of $24,013 to $75,000 in 1998,
unsecured, due dates - 1998 through
2027 $ -- $ 590,418 $ 487,775
Notes payable to banks, interest ranging from
9.25% to 12.40%, due dates ranging from
1998 to 2006, monthly payments ranging
from $170 to $1,834 with a balloon
payment due in 1998 ($51,134), secured
by vehicles, equipment and real estate 703,061 138,162 230,305
Notes payable to vehicle finance companies,
interest ranging from 3.9% to 16% per
annum, payments from $264 to $851 per
month, due from 1999 to 2002 84,409 82,783 75,835
Notes payable to individuals, interest at 12%
per annum, payment at $677 per month,
due 2011, collateralized by real estate 56,095 53,797 125,327
Note payable to bank, guaranteed by the Small
Business Administration, 11.25% per
annum, monthly payments of $1,298,
collateralized by all buildings and
equipment of Protech, Inc., due 2112 206,453 112,850 149,458
</TABLE>
F-17
<PAGE> 63
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
<TABLE>
<S> <C> <C> <C>
Capital lease obligations, for vehicles
effective interest of 12% to 25.92% per
annum, monthly payments of $72 to
$5,975, lease terms of 24 to 39 months,
ending in 2000 (Note I) 296,436 306,029 172,221
---------- ---------- ----------
$1,346,454 1,284,039 1,240,921
==========
Less current portion 370,855 229,387
---------- ----------
$ 913,184 $1,011,534
========== ==========
</TABLE>
Future minimum lease payments of capital lease obligations for the five years
succeeding December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 199,806
1999 117,478
2000 5,610
---------
322,894
Less amounts representing interest 16,865
---------
Principal payments $ 306,029
=========
</TABLE>
Maturities of long-term debt (excluding capital leases) for the five years
succeeding December 31, 1997 are $422,589 in 1998, $125,028 in 1999, $80,061 in
2000, $61,665 in 2001 $57,679 in 2002 and $418,645, thereafter.
D. SHAREHOLDERS' EQUITY
The Company has issued 700,866 shares of its no-par common stock to two of its
key officers in lieu of interest for two loans with the Company totaling
$154,975 (see note C). The loans have no stated term but are expected to be
repaid within five years. The Company has recorded debt issue costs totaling
$97,446 in 1996 related to the issuance equal to the value of the shares issued
in lieu of interest. The average issuance price of shares issued through the
date of the loans was used in the computation of the value of the shares issued.
Unamortized debt issuance costs are amortized over the remaining five years,
assuming an interest rate of 12 1/4% per annum.
As of December 31, 1997, the Company had issued a total of 42,235 shares in lieu
of wages and rent valued at $152,000 which has been charged to operations.
F-18
<PAGE> 64
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
D. SHAREHOLDERS' EQUITY (CONTINUED)
The Company has reserved 1,500,000 shares of common stock for adoption of an
incentive stock option plan for its employees. The options vest immediately and
expire within 10 years of the date of grant (2006). As of December 31, 1997, and
1996, 470,007 options had been granted under this plan at an option price of
$2.40 per share. The Company has reserved 500,000 shares of common stock for the
adoption of a non-qualified stock option plan. In July, 1997, 400,000
non-qualified compensatory options were granted under this plan, with immediate
vesting, exercisable for up to ten years, at $.01 per share. Accordingly, the
Company recorded compensation expense of $1,396,000 for the difference between
the strike price and the fair value of the underlying stock ($3.50 per share) at
the date of grant using the intrinsic value based method of accounting
prescribed by APB opinion No. 25, and as permitted under SFAS statement 123 -
Accounting for Stock Based Compensation.
As permitted by SFAS 123, the Company used the Black-Scholls method of computing
the fair value of options at the date of grant. Accordingly, pro-forma amounts
using the fair value method of reporting compensatory options are the same as
reported under APB opinion No. 25. The weighted average risk-free interest rate
used to estimate the fair value was 5.59%, with no expected dividends.
In 1996, the Company had granted 83,333 warrants for the purchase of common
stock to an equipment lessor at an exercise price of $2.40 per share as part of
its lease agreement. These warrants may be exercised within one year from the
date of first funding and expire in 2006. No services were rendered as
consideration for these warrants. In addition, the Company has issued warrants
for the purchase of 5,000 shares of common stock to a soliciting dealer in
consideration for services rendered in connection with the offering of Series A
Preferred Stock outlined below. The warrants entitle the holder to acquire
common stock for $5.00 per share exercisable before June, 2002. The value of
these warrants at the date of grant was estimated to be approximately $2,400.
On June 30, 1997, the Company commenced a private placement offering for 142,857
shares of common stock at $3.50 per share. The offering expired on December 31,
1997. Under the terms of the offering, each share was entitled to a warrant for
the purchase of one share of common stock at $6.00 per share, exercisable before
July, 2000. At December 31, 1997, 124,407 warrants were granted under the
offering.
As of December 31, 1997, the Company had issued 64,410 shares of 10%, $.001 par
value, cumulative, convertible Series A Preferred Stock as part of a 150,000
share offering at $10.00 per share. The preferred shares are convertible at any
time to common stock at a rate of one to 1.093585771. The preferred shares carry
voting rights. The shares carry liquidation preferences at $10.00 per share plus
an amount equal to all accumulated and unpaid dividends. The Company has the
option to call the Series A Preferred Stock for redemption at any time. The
price to the holders of the Series A Preferred Stock by Venturi for any such
redemption shall equal $11.00 per share plus any accrued or unpaid dividends to
the date of the call for redemption. Such redemption price shall, at the option
of the holder of the shares, either be paid in cash or in common stock at a
conversion rate of 1.093585771 of common stock for each share of Series A
Preferred Stock. Holders of the Series A Preferred Stock are entitled to
receive, when declared by the Board of Directors, cumulative cash dividends of
$1.00 per share annually, in priority to common stock dividends. As of December
31, 1997, the Company had paid $36,892 in preferred dividends and was obligated
for $17,918 in preferred dividends in arrears, representing a total of $54,810
in preferred dividends declared in 1997. The Company declared a total of $9,890
in preferred dividends in 1996. Accordingly, these amounts were used in arriving
at income available to common shareholders in computing earnings per share. The
Company has
F-19
<PAGE> 65
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
D. SHAREHOLDERS' EQUITY (CONTINUED)
the option to call the Series A Preferred Stock for redemption at any time at a
redemption price of $11.00 per share plus any unpaid dividends. The redemption
may be paid in cash or converted to common stock at a conversion rate of one
share of common stock for each share of preferred stock, at the option of the
holder. Each share of preferred stock includes a warrant to acquire one share of
common stock for $5.00 exercisable before June, 2002. In December 1997, the
Company commenced a private placement of 300,000 shares of 6% Series B,
cumulative, convertible Preferred Stock (315,000 shares authorized) to
Entrepreneurial Investors, Ltd. The placement is to occur in three phases as
follows:
- Phase I for 200,000 shares at $5.00 per share on or before
December 31, 1997.
- Phase II for 50,000 shares at $20.00 per share or before March 31,
1998.
- Phase III for 50,000 shares at $20.00 per share on or before June
30, 1998.
The shares have a cumulative dividend of 6% per annum, payable on a quarterly
basis with shares of common stock based on the 30 day average closing bid price
of the common stock prior to the dividend date. As of December 31, 1997, the
Company had not paid and was not obligated for any Series B preferred dividends.
Each share of preferred stock is convertible into five shares of common stock.
The shares carry liquidation preferences of $10.00 per share plus all
accumulated and unpaid dividends. Prior to December 31, 1997, the Company had
issued 200,000 shares under Phase I of the agreement for $1,000,000. Under a
subscription agreement, the Company received $870,000 of the proceeds shortly
after year-end with the remaining $130,000 used to pay commissions to Equity
Services, Ltd (ESL) for commissions, legal fees and expenses. These costs have
been included in general and administrative expenses in 1997.
Concurrent with each phase of the offering, the Company is obligated to issue
5,000 additional shares at $5.00 per share to ESL as additional payment of fees
and expenses. At December 31, 1997, 5000 shares were issued to ESL for these
services which have been charged to operations.
As part of the offering, the Company has agreed to grant to ESL, 50,000 options
to acquire common stock upon the completion of each phase of the offering at an
option price of $3.00 per share.
The Company has not declared, nor paid any common stock dividends for 1997 or
1996. The options, warrants, and convertible preferred stock instruments
mentioned above are all securities potentially dilutive in future periods and
were not included in the computation of earnings per share in 1997 and 1996
because they are considered anti-dilutive in periods when the Company reports
losses from continuing operations. Subsequent to year-end, the Company has
commenced additional placements of common and preferred stock bearing warrants
and options (see Note H).
F-20
<PAGE> 66
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
E. RELATED PARTY TRANSACTIONS
The Company has entered into several notes payable with officers and
shareholders of the Company. The amounts and terms of these notes are disclosed
in Note C.
At December 31, 1997 and 1996, the Company had accrued management fees to
certain officers and shareholders of the Company of $54,952 and $5,000
respectively. The Company paid management fees of $137,048 in 1997 and $263,000
in 1996 to these officers or to entities owned principally by them. These fees
were for services rendered by the officers in lieu of wages and, in some cases,
the fees were paid to the same officers owed under notes payable outlined in
Note C.
In 1997, the Company paid $39,628 in fees to an accounting firm which is owned
by an officer and shareholder of the Company.
The Company issued 14,285 common shares in 1996, together with warrants to
purchase additional common shares (see Note D), to the Company's primary
equipment lessor for $25,000 as part of a lease agreement between the parties.
The Company also paid rent in 1997 of $24,500 with 7,000 shares of the Company's
common stock. This shareholder was paid a total of $48,000 in cash and common
stock in 1997 for facilities used by the Company. In 1997, the Company paid
$3,400 in commissions to a shareholder who brokered a significant vehicle lease
agreement for the Company. The Company also paid $15,000 to a shareholder for a
research study of the Company's carpet cleaning solution.
During 1997, the Company's president opened a personal checking account which
was used to pay certain business expenses of the Company. Some company funds
were deposited into this account to cover these expenses. As of December 31,
1997, the Company was owed approximately $18,000 from its president for excess
funds deposited into the account.
F. DISCONTINUED OPERATIONS
In January, 1996, the Company acquired the net assets of Dependable Janitorial
and those of Dependable Carpet Cleaning by issuing 137,499 shares of its common
stock. Late in 1996, the Company sold back the net assets of Dependable
Janitorial in return for the recision of 91,666 shares. No gain or loss was
recorded on the transaction as the value of the shares rescinded approximated
the original acquisition value of the shares issued for Dependable Janitorial.
The operating results of the discontinued operations are as follows:
<TABLE>
<S> <C>
Revenues $230,790
Expenses, including depreciation expense of $13,500 154,036
--------
Net income before taxes 76,754
Income taxes 14,346
--------
Net income $ 62,408
========
</TABLE>
After the sale, the Company retained the assets of Dependable Carpet Cleaning,
which include vehicles and some computer equipment. The income from discontinued
operations as disclosed on the statement of operations
F-21
<PAGE> 67
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
F. DISCONTINUED OPERATIONS (CONTINUED)
represents all of the income earned from operations in 1996 by the Company
related to the operations of Dependable Janitorial.
G. INCOME TAXES
The Company recognizes the tax effects of transactions in the year in which such
transactions enter into the determination of net income, regardless of when
reported for tax purposes. Deferred taxes are provided in the financial
statements to give effect to the resulting temporary differences which arise
primarily for differences in accounting methods, the basis of fixed assets, and
depreciation methods based on the income taxes expected to be payable in future
years. Tax credits (if any) are accounted for by the flow-through method as a
reduction of the current income tax provision.
There was no significant provision for federal or state income taxes for 1997 as
the Company has incurred operating losses and there can be no assurance that the
Company will realize the benefit of the resulting net operating loss
carryforwards.
Income tax expense (benefit) for 1996 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
From continuing operations:
Federal $(16,694) $(49,843) $(66,537)
State 0 0 0
From discontinued operations:
Federal 14,346 0 14,346
State 0 0 0
-------- -------- --------
Total $ (2,348) $(49,843) $(52,191)
======== ======== ========
</TABLE>
Components of deferred tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996
----------- -----------
<S> <C> <C>
Depreciation differences $ (10,061) $ 17,397
Cash to accrual adjustments (63,099) (34,989)
Stock based compensation (488,600) --
Net operating loss (862,409) (318,361)
Valuation allowance 1,424,170 286,110
----------- -----------
Net deferred tax benefit $ 0 $ (49,843)
=========== ===========
</TABLE>
F-22
<PAGE> 68
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
G. INCOME TAXES (CONTINUED)
Reconciliation of taxes at the federal statutory rate to income tax benefit:
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996
----------- -----------
<S> <C> <C>
Tax benefit computed at the federal income tax
rate of 35% $(1,106,859) $ (416,350)
Losses of enterprises passed through to shareholders
in periods prior to combination -- 76,999
Other (31,650) 1,050
Increase valuation allowance 1,138,509 286,110
----------- -----------
Net benefit $ 0 $ (52,191)
=========== ===========
</TABLE>
The Company has adopted the provisions of Financial Accounting Statement No.
109, "Accounting for Income Taxes." Under Statement 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial operating
and tax bases of assets and liabilities and are measured using the enacted
marginal tax rates and laws that will be in effect when the differences are
expected to reverse.
Due to the uncertainties surrounding the timing of realizing the benefits of its
favorable tax attributes in future tax returns, the Company has placed a
valuation allowance against its otherwise recognizable deferred tax assets. The
valuation allowance increased by approximately $1,138,000 during the year ended
December 31, 1997 and by approximately $286,000 during the year ended December
31, 1996. The increase in the valuation allowance is due to the increase in the
net operating loss carry forward.
The 1996 current tax benefit results from the carry-back to prior years income
taxes of the net operating loss created in 1996. Future net operating loss
carry-forwards may be limited by the provisions of IRC Section 382, which
potentially limits the use of net operating losses after a significant change in
ownership of an entity occurs.
Current tax expense for 1996 does not include the tax effects of the Protech,
Inc. (Stone Maintenance) profit or loss, which was an S-Corporation through the
date of its combination with the Company. Accordingly, taxable income prior to
this date will be taxed to the former shareholders of Protech, Inc. Net
operating loss carryforwards of $2,464,026 will expire in 2011 and 2012.
H. SUBSEQUENT EVENTS
In February, 1998 the Company entered into lease financing agreement for the
financing of trucks and carpet cleaning equipment in an amount of up to
$3,000,000. The lease financing is scheduled to occur in three phases dependent
upon the successful completion of each phase of the Series B preferred stock
placement mentioned in note D. Each phase of the funding will consist of
$1,000,000 to be paid in stages. The first phase was completed as of April 15,
1998. The Company has granted warrants under the agreement for the purchase of
common shares equal to 6 1/4% of the fully diluted shares of common stock
outstanding exercisable within ten years at a strike price of $.05 per share.
F-23
<PAGE> 69
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
H. SUBSEQUENT EVENTS (CONTINUED)
Shortly after year end, the Company received $870,000 for the issuance of
200,000 shares of Preferred Stock in 1997 under a subscription arrangement (see
Note D). Under phase two of the Series B preferred stock agreement (see Note D),
the Company has issued 50,000 shares of preferred stock since December 31, 1997
for $20.00 per share and an additional 5,000 shares of preferred stock at 5.00
per share to ESL for commission fees and services. Concurrent with the
completion of phase two of the agreement, the Company has granted another 50,000
options for the purchase of common stock exercisable within five years for $3.00
per share. Phase three of the agreement is expected to take place prior to June
30, 1998 which will involve the issuance of another 50,000 shares for $5.00 per
share, and the grant of another 50,000 options exercisable for five years at a
strike price of $3.00 per share.
Effective January 15, 1998, the Company commenced a private placement offering
of up to 178,572 shares at $3.50 per share for total proceeds of $625,000. Each
share of common stock purchased under the placement will be accompanied by a
warrant to purchase an additional share of common stock for $6.00 per share
exercisable before July 1, 2001. To date, the Company has issued 50,000 shares
for $175,000 under the placement.
On March 31, 1998, the Company issued 4,000 shares of common stock in exchange
for the net assets of Protech Carpet Cleaning (not Protech, Inc.), another
carpet cleaning business located in Riverton, Utah.
On April 30, 1998, the Company issued 7,500 shares of common stock in exchange
for the net assets of Complete Carpet Service located in Dallas, Texas. Both
acquisitions were made pursuant to the Company's strategy of growth through
acquisition. It is anticipated that these acquisitions will be accounted for
under the pooling of interest method of accounting. Pro forma net loss for 1997
and 1996 as if these mergers had occurred at January 1, 1996 is $3,091,127 and
$1,099,186, respectively.
The Company was obligated to authorize the issuance of 1,000,000 shares of 6%
Cumulative, Convertible NonVoting Series C Preferred Stock at a purchase price
of $2.05 per share under a stock purchase agreement dated April 10, 1998. Under
the agreement, the Company has granted options for the purchase of additional
shares exercisable within five years from the date of closing. For every two
shares of Series C Preferred Stock purchased, the Series C Preferred
Shareholders received one warrant to acquire common stock at a price of $2.05
per share.
The Company has also issued 150,000 shares of common stock in lieu of cash for
consulting services rendered in 1998.
F-24
<PAGE> 70
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
I. LEASE COMMITMENTS AND CONTINGENCIES
The Company leases vehicles, which are recorded in the financial statements as
capitalized leases (see Note C). Total amortization of leased vehicles included
in depreciation expense is $73,583 for 1997 and $15,263 for 1996.
The Company also leases office space and certain equipment under cancelable and
non-cancelable lease arrangements accounted for as operating leases. Rent
expense under these leases was $83,820 in 1997 and $71,357 in 1996. Future
minimum payments under non-cancelable lease arrangements for the next five years
are as follows: $90,360 in 1998, $57,300 in 1999, $49,350 in 2000, and $12,000
in 2001.
The Company is currently defending a lawsuit brought by owners of a once
prospective merger candidate. The plaintiffs are asserting damages of $2,500,000
for violation of Texas Securities laws. As of the date of this report, the
Company has not answered the plaintiff's complaint, but intends to do so and to
vigorously pursue a counterclaim against the plaintiff for misrepresentations
made to induce the Company to acquire the plaintiffs company. Both the Company's
management and its legal counsel believe the plaintiff will not recover a
material judgement against the Company.
J. RESTATEMENT OF 1996 FINANCIAL STATEMENTS AND PRIOR PERIOD ADJUSTMENTS
In 1996, the Company acquired the net assets of Protech, Inc. (Stone
Maintenance) under a business combination accounted for as a pooling of
interests. The Company issued common stock for the common shares of Protech and
included the assets, liabilities and historical operations of Protech in its
combined audited financial statements for the year ended December 31, 1996.
Subsequent to December 31, 1996, the Company concluded that several debt
instruments owing to the former owner of Protech were inadvertently excluded
from the 1996 balance sheet. The loans dated back to 1994 and earlier years when
Protech was using personal debt of the former owner to fund operations. The
Company did not adjust the number of shares given in the exchange and equivalent
shares received did not change. However, the Company did agree to acquire the
additional liabilities as an adjustment to the value of shares given in the
exchange. Beginning 1996 retained earnings has been restated to reflect the
loans by $326,799. In addition, 1996 net loss has been increased by $10,991 to
restate 1996 revenues for immaterial loan proceeds originally accounted for on
Protech's financial statements as revenues.
F-25
<PAGE> 71
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION IN THIS PROSPECTUS IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
Prospectus Summary.
Risk Factors.
Use of Proceeds
Dividend Policy
Dilution.
Capitalization.
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Business of Venturi
Management.
Principal and Converting Stockholders.
Description of Securities
Shares Eligible for Future Sale
Plan of Distribution.
Available Information
Index to Financial Statements........................................... F-1
UNTIL [DATE], 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS.
[COMPANY LOGO]
1,954,862 SHARES OF COMMON STOCK
PROSPECTUS
July 29, 1998
<PAGE> 72
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and the Bylaws of the Registrant contain
provisions providing for the indemnification by the Registrant of all past and
present directors, officers, employees or agents of the Registrant. Such parties
are indemnified from and against any and all liability and expense that may be
imposed upon or incurred by such person in connection with or resulting from any
claim, action, suit, or proceeding, civil or criminal, in which the person has
become involved, as a party or otherwise, by reason of being or having been a
director, officer or employee of the corporation, whether or not the person
continues to be such at the time of such liability or expense shall have been
imposed or incurred. However, no such director, officer or employee shall be
entitled to claim such indemnity with respect to any matter as to which there
shall have been a final adjudication that the person has committed or allowed
some act or omission, (a) otherwise than in good faith in what the person
considered to be the best interests of the corporation, and (b) without
reasonable cause to believe that such act or omission was proper and legal. In
addition, there shall be no indemnity in the event of a settlement of such
claim, action, suit, or proceeding unless (a) the court having jurisdiction of
the matter shall have approved of such settlement with knowledge of the
indemnity provided in the Articles, or (b) a written opinion of independent
legal counsel, selected by or in manner determined by the Board of Directors,
shall have been rendered substantially concurrently with such settlement. A
conviction or judgment (whether based on a plea of guilty, or nolo contendere or
its equivalent, or after trial) in a criminal action, suit or proceeding shall
not be deemed an adjudication that such director, officer or employee has
committed or allowed some act or omission as provided above if independent legal
counsel, selected as set forth above, shall substantially concurrently with such
conviction or judgment give to the corporation a written opinion that such
director, officer or employee was acting in good faith in what he or she
considered to be the best interests of the corporation or was not without
reasonable cause to believe that such act or omission was proper and legal.
The specific provisions of the Articles of Incorporation of the Registrant with
respect to the indemnification of directors and officers are as follows:
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The personal
liability of a director or officer of the corporation to the corporation or the
Stockholders for damages for breach of fiduciary duty as a director or officer
shall be limited to acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law.
ARTICLE X - INDEMNIFICATION: Each director and each officer of the corporation
may be indemnified by the corporation as follows:
(a) The corporation may indemnify any person who was or is a party, or
is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against
II-1
<PAGE> 73
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement, actually and reasonably incurred by him in
connection with the action, suit or proceeding, if he acted in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation and with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding, by judgment, order settlement,
conviction or upon a plea of nolo contendere or its equivalent,
does not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation, and
that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation may indemnify any person who was or is a party, or
is threatened to be made a party, to any threatened, pending or
completed action or suit by or in the right of the corporation, to
procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
expenses including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification
may not be made for any claim, issue or matter as to which such a
person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action
or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances
of the case the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this Article, or in defense of any
claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorney's fees, actually
and reasonably incurred by him in connection with the defense.
(d) Any indemnification under subsections (a) and (b) unless ordered
by a court or advanced pursuant to subsection (e), must be made by
the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The
determination must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act,
suite or proceeding;
(iii) If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders,
by independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not parties to
the act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
II-2
<PAGE> 74
(e) Expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any
rights to advancement of expenses to which corporate personnel
other than directors or officers may be entitled under any
contract or otherwise by law.
(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled
under the certificate or articles of incorporation or any
bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his
official capacity or an action in another capacity while
holding his office, except that indemnification, unless
ordered by a court pursuant to subsection (b) or for the
advancement of expenses made pursuant to subsection (e) may
not be made to or on behalf of any director or officer if a
final adjudication establishes that his acts or omissions
involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of
action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
The specific provisions of the Bylaws with respect to indemnification of
directors and officers are as follows:
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless prohibited
by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be so involved in any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit or proceeding
brought by or in the right of the corporation to procure a judgment in its favor
(collectively, a "Proceeding") by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other entity or enterprise, against all Expenses and Liabilities actually and
reasonably incurred by him in connection with such Proceeding. The right to
indemnification conferred in this Article shall be presumed to have been relied
upon by the directors, officers, employees and agents of the corporation and
shall be enforceable as a contract right and inure to the benefit of heirs,
executors and administrators of such individuals.
Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada law. Such agreements or arrangements may provide (i)
that the Expenses of officers and
II-3
<PAGE> 75
directors incurred in defending a civil or criminal action, suit or proceeding,
must be paid by the corporation as they are incurred and in advance of the final
disposition of any such action, suit or proceeding provided that, if required by
Nevada Law at the time of such advance, the officer or director provides an
undertaking to repay such amounts if it is ultimately determined by a court of
competent jurisdiction that such individual is not entitled to be indemnified
against such expenses (iii) that the Indemnitee shall be presumed to be entitled
to indemnification under this Article or such agreement or arrangement and the
corporation shall have the burden of proof to overcome that presumption, (iii)
for procedures to be followed by the corporation and the Indemnitee in making
any determination of entitlement to indemnification or for appeals therefrom and
(iv) for insurance or such other Financial Arrangements described in Paragraph
7.02 of this Article, all as may be deemed appropriate by the Board of Directors
at the time of execution of such agreement or arrangement.
Section 7.03 Insurance and Financial Arrangements. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out of
his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv) the establishment of a
letter of credit, guaranty or surety.
Section 7.04. Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and,
without limitation, means (i) all direct and indirect costs incurred,
paid or accrued, (ii) all attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, food and
lodging expenses while traveling, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service, freight or
other transportation fees and expenses, (iii) all other disbursements
and out-of-pocket expenses, (iv) amounts paid in settlement, to the
extent permitted by Nevada Law, and (v) reasonable compensation for
time spent by the Indemnitee for which he is otherwise not compensated
by the corporation or any third party, actually and reasonably incurred
in connection with either the appearance at or investigation, defense,
settlement or appeal of a Proceeding or establishing or enforcing a
right to indemnification under any agreement or arrangement, this
Article, the Nevada Law or otherwise; provide, however, that "Expenses"
shall not include any judgments or fines or excise taxes or penalties
imposed under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or other excise taxes or penalties.
Liabilities. "Liabilities" means liabilities of any type
whatsoever, including, but not limited to, judgments or fines, ERISA or
other excise taxes and penalties, and amounts paid in settlement.
Nevada Law. "Nevada Law" means Chapter 78 of the Nevada
Revised Statutes as amended and in effect from time to time or any
successor or other statutes of Nevada having similar import and effect.
This Article. "This Article" means Paragraphs 7.01 through
7.04 of these By-Laws or any portion of them.
II-4
<PAGE> 76
Power of Stockholders. Paragraphs 7.01 through 7.04, including
this Paragraph, of these ByLaws may be amended by the stockholders only
by vote of the holders of sixty-six and two-thirds percent (66-2/3%) of
the entire number of shares of each class, voting separately, of the
outstanding capital stock of the corporation (even though the right of
any class to vote is otherwise restricted or denied); provided,
however, no amendment or repeal of this Article shall adversely affect
any right of any Indemnitee existing at the time such amendment or
repeal becomes effective.
Powers of Directors. Paragraphs 7.01 through 7.04 and this
Paragraph of these By-Laws may be amended or repealed by the Board of
Directors only by vote of eighty percent (80%) of the total number of
Directors and the holders of sixty-six and two-thirds percent (66-2/3%)
of the entire number of shares of each class, voting separately, of the
outstanding capital stock of the corporation (even though the right of
any class to vote is otherwise restricted or denied); provided,
however, no amendment or repeal of this Article shall adversely affect
any right of any Indemnitee existing at the time such amendment or
repeal becomes effective.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses of this offering are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee $ 2,000
Blue Sky fees and expenses $ 3,000
Printing and engraving expenses $ 10,000
Legal fees and expenses $ 70,000
Accounting fees and expenses $ 10,000
Miscellaneous $ 5,000
Total $100,000
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years (since July 1, 1995), the Registrant sold securities
without registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act") as follows:
<TABLE>
<CAPTION>
SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------
<S> <C> <C>
Series A Preferred Don & Katherine Halsey $12,500/$10.00 per share
Henry Ross $25,000/"
Pete & Angie Danna $20,000/"
John Towers $2,500/"
Carroll Kennedy Burgess $25,000/"
Theodore Tuinstra $10,000/"
Leo Smith $15,000/"
Mary Kirk $10,000/"
Jerry & Mai Hamilton $10,000/"
Robert Davidson $25,000/"
Doug Rhone $25,000/"
Marjorie McCray $35,000/"
J. Moyle $30,000/"
</TABLE>
II-5
<PAGE> 77
<TABLE>
<S> <C> <C>
Henry Ross $10,000/"
David Sartain $12,500/"
Clyde Webb $25,000/"
Edward J. Gallatin $25,000/"
Vikki Munadeo $25,000/"
Wayne Farlow $21,000/"
Bill Sass $25,000/"
Raymond Earl Sloan $15,000/"
Paul B. Fletcher $20,000/"
Marybess Salvaggio $20,000/"
Bennett E. Greenfield $15,000/"
George E. Kugler $15,000/"
Rebecca J. Das $20,000/"
Robert D. Stephens, Jr. $25,000/"
George & Frances Tyler $15,000/"
Suelema M. Roman $25,000/"
Jack J. Stephens $13,000/"
Mickey Long $12,500/"
George R. Tyler $15,000/"
Sandi Kinney $13,000/"
Bruce Axtell $25,000/"
Series B Preferred Entrepreneurial Investors, Ltd. $2,000,000
Equity Services, Ltd. $0
Series C Preferred CDL Emerging Growth Fund I, L.L.C. $764,367.10
Common Stock Ron & Leslie Rutledge $4,000
Rebecca Stahle $1,500
Erie Dekker Asset acquisition
Sentry Financial $25,000
Jerry Thomas Asset acquisition
William Thomas Asset acquisition
Jim Riley Asset acquisition
Alvin Childers Asset acquisition
Doug Gilbert Asset acquisition
June Thomas Asset acquisition
Aaron & Tami Pyfer $2,400
Kevin Pyfer $24,000
HPKK Family Trust $5,040
Claudeen Hill $8,208
Ronald Karren $42,075
American Pension:Ronald Karren $7,925
Alan Bingham $1,200
Jim & Patrice Stone Asset acquisition
William Moore $12,000
Ray Lynn Jorgensen $1,500
Gregg Anderson $11,000
Scott Farrer $15,000
Bill Davidson $100,000
Bruce Axtell $185,000
</TABLE>
II-6
<PAGE> 78
<TABLE>
<S> <C> <C>
Bryan Karren $1,500
Kevin Karren $1,000
Julie Karren $375
Darrell Karren $375
Leslie Ann Karren $375
Tim Woodard $1,500
Thomas Williams $5,000
The Priority Group $50,000
Dawn Baker $1,050
Richard Barnes $1,000
Adam Dunn $1,000
Brandon Horrocks $1,000
Robert Cless Karren $5,005
Stanley Kopesec $2,706
Professional Painting $50,001
Cochran, Lund & Davidson $25,000
Kevin & Patti Pyfer $14,000
Stuart Starkey $5,000
Kirby Cochran $5,000
Brett Davis $1,000
The Priority Group $50,000
Brent Higginson $2,100
Jim & Patrice Stone $10,000
Riverbottom Hollow $24,500
Ned Karren $3,500
The Priority Group $56,575
Floyd & Patricia Fox $4,000
Joe Fox $58,717
Louis Sacco $21,000
Benjamin Press $35,000
Jonelle Weber/Mark Cripe $1,015
Robert E. Fellows $3,500
Margo Murphy $3,500
Doran Pratte $10,000
Jason Barker $301
Robert Barnes $1,201
Kevin Campbell $200
Keith Hexem $2,632
Tom Jensen $2,986
Jeremy Marini $959
Jim Stone $5,184
Chad Taylor $1,799
Marlane Wright $2,415
Doug Zibriskie $4,000
Jamie Zuniga $301
Dale Karren $2,261
Jaime Robles $1,560
Raul Robles $1,560
Leslie Rutledge $739
Bill Thomas $3,399
Bridge Whitmire $1,407
</TABLE>
II-7
<PAGE> 79
<TABLE>
<S> <C> <C>
Tim Woodard $3,059
Blake Horrocks $5,131
Brandon Horrocks $3,521
Marsan Horrocks $1,701
Derrick Pyper $1,421
Susan Rittimann $2,293
Debbie Taylor $2,786
Eric Iverson $1,106
Jerry Thomas $2,751
John Hawkes $949
Vickie Johnson $2,163
Bo Hopkins $480
Kevin Karren $2,951
Joel Karren $2,034
Ed Norton $4,501
Randy Norton $718
Brandon Paris $399
Nate Robins $511
John Hopkins $16,002
Gaylord Karren $16,002
Shane Karren $480
Cless Karren $5,005
Ron Karren $15,000
Doug Zibriskie $2,000
Bill Maxwell $0
Jim Stone $0
L. G. Rose Fees
Darin Yancey $2,500
Marvin Yancey $10,000
Mike Cox $4,500
Protech Carpet Asset acquisition
Complete Carpet Care Asset acquisition
Reed Buley $10,000
Floyd & Patricia Fox $4,000
Capital Solutions Fees
Capital Solutions, Inc. $0
Delta Financial Solutions, Inc. $0
</TABLE>
ITEM 27. EXHIBITS
EXHIBIT NO. DESCRIPTION
3.0 Articles of Incorporation of Venturi Technologies, Inc. (Nevada),
as amended
3.1 Bylaws of Venturi Technologies, Inc.
3.2 Amended and Restated Articles of Incorporation of Venturi
Technologies, Inc. (Texas) dated 5-23-96
3.3 Articles of Incorporation of Action Venturi Technology, Inc. dated
8-15-94
3.4 Bylaws of Action Venturi Technology, Inc.
II-8
<PAGE> 80
3.5 Articles of Incorporation of T-Co Manufacturing, Inc. dated 5-8-97
4.0 Specimen Stock Certificate
4.1 Articles of Incorporation of Venturi Technologies, Inc. (Nevada),
as amended pp. 4-5 (See above Exhibit 3.0)
4.2 Bylaws of Venturi Technologies, Inc., pp. 12-13 (See above
Exhibit 3.1)
4.3 Certificate of Designation of Preferences, Limitations, and
Relative Rights for Venturi Technology Enterprises, Inc. for
Series A and Series B Preferred Stock dated 12-24-97
4.4 Action by Unanimous Written Consent of the Board of Directors of
Venturi Technologies Inc. Creating Series C Preferred Stock dated
7-98 with Exhibit
4.5 Registration Rights Agreement with Equity Services, Ltd. dated
12-31-97
4.6 Registration Rights Agreement with Entrepreneurial Investors, Ltd.
dated 12-31-97
4.7 Lock Up Agreement with Equity Services, Ltd. dated 12-23-97
4.8 Lock Up Agreement with Invest Linc Emerging Growth Equity Fund I,
L.L.C. dated 7- 28-98
4.9 Master Equipment Financing Agreement with Sentry Financial Corp.
dated 6-18-96
4.10 Master Lease Agreement with Northstar Capital LLC dated 2-17-98
5.0 Opinion Letter of Mackey Price & Williams Regarding Legality of
Securities dated 7- 29-98
10.0 Dual Stock Option Plan between Venturi Technology Enterprises,
Inc. and its key employees, officers, directors and consultants
dated 7-97
10.1 Form Incentive Stock Option Agreement between Venturi Technology
Enterprises, Inc. and its employees dated 1-1-97
10.2 Form Non-Statutory Stock Option Agreement between Venturi
Technology Enterprises, Inc. and its consultants dated 7-1-97
10.3 Non-Statutory Stock Option Agreement between Venturi Technology
Enterprises, Inc. and Merril Littlewood dated 7-1-97
10.4 Requirements Agreement with DT Enterprises dated 2-15-96
10.5 Exclusive Use and Purchase Agreement between Primacide, LLC and
Venturi Technologies, Inc.
10.6 Placement Agent's Option Certificate with Equity Services, Ltd.
dated 6-30-98
10.7 Agreement of Collateral between Gaylord Karren and John Hopkins
and HiTek Carpet Care Inc. dated 3-97
10.8 Patent Application Assignment between John M. Hopkins and Venturi
Technology Enterprises, Inc. dated 12-22-97
10.9 Patent Application Assignment between Gaylord Karren and Venturi
Technology Enterprises, Inc. dated 12-22-97
10.10 Patent Assignment between John M. Hopkins and Venturi Technology
Enterprises, Inc. dated 12-22-97
10.11 Verified Statement Claiming Small Entity Status by John M. Hopkins
dated 3-17-97
10.12 Verified Statement Claiming Small Entity Status by Gaylord Karren
dated 3-17-97
10.13 Master Equipment Financing Agreement with Sentry Financial Corp.
dated 6-18-96 (See above Exhibit 4.9)
10.14 Master Lease Agreement with Northstar Capital LLC dated 2-17-98
(See above Exhibit 4.10)
10.15 Warrant Purchase Agreement between Northstar Capital, LLC and
Venturi Technology Enterprises, Inc. dated 2-17-98
10.16 Letter from Capital Partners Extending Lease Funding to Venturi
Technology Enterprises, Inc. dated 5-7-98
II-9
<PAGE> 81
10.17 Agreement of Purchase and Sale of Assets between Bill Thomas,
d.b.a. T-Co Carpet Cleaning and T-Co Heating Systems, and Venturi
Technologies, Inc. dated 3-96
10.18 Agreement of Purchase and Sale of Assets between Michael
Shurtliff, d.b.a. Protech Carpet Cleaning and Flood Restoration,
and Venturi Technology Enterprises, Inc. dated 3-31-98
10.19 Bill of Sale and Assignment between Michael Shurtliff, d.b.a.
Protech Carpet Cleaning and Flood Restoration, and Venturi
Technology Enterprises, Inc.
10.20 Liabilities Undertaking between Michael Shurtliff, d.b.a. Protech
Carpet Cleaning and Flood Restoration, and Venturi Technology
Enterprises, Inc. dated 4-98
10.21 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Michael Shurtliff, d.b.a. Protech
Carpet Cleaning and Flood Restoration, and Venturi Technology
Enterprises, Inc. dated 4-98
10.22 Agreement of Purchase and Sale of Assets between Reed T. And Lana
B. Buley, d.b.a. Complete Carpet Service, and Venturi Technology
Enterprises, Inc. dated 4-30-98
10.23 Bill of Sale and Assignment between Reed T. and Lana B. Buley and
d.b.a. Complete Carpet Service Venturi Technology Enterprises,
Inc.
10.24 Liabilities Undertaking between Reed T. and Lana B. Buley d.b.a.
Complete Carpet Service and Venturi Technology Enterprises, Inc.
dated 4-98
10.25 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Reed T. and Lana B. Buley d.b.a.
Complete Carpet Service and Venturi Technology Enterprises, Inc.
dated 4-98
10.26 Letter of Intent re: Proposed Acquisition by Venturi Technology
Enterprises, Inc. of Carpet and Upholstery Cleaning Assets of
Daniel M. Levine
10.27 Agreement of Purchase and Sale of Assets between Daniel M. and
Kathleen L. Levine, d.b.a. All Valley Carpet, All Valley Carpet &
Upholstery and All Valley Restoration Service, and Venturi
Technology Enterprises dated 7-3-98
10.28 Bill of Sale and Assignment between Daniel M. and Kathleen L.
Levine, d.b.a. All Valley Carpet, All Valley Carpet & Upholstery
and All Valley Restoration Service, and Venturi Technology
Enterprises, Inc.
10.29 Liabilities Undertaking between Daniel M. Levine, d.b.a. All
Valley Carpet, All Valley Carpet & Upholstery and All Valley
Restoration Service, and Venturi Technology Enterprises dated
7-3-98
10.30 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Daniel M. Levine and Venturi
Technology Enterprises dated 7-3-98
10.31 Agreement of Purchase and Sale of Assets between Video Aire and
Venturi Technology Enterprises, Inc. dated 6-30-98
10.32 Letter of Intent re: Proposed Acquisition of Assets between Dirt
Free Carpet & Upholstry [sic] Cleaning Inc. and Venturi Technology
Enterprises dated 6-29-98
10.33 Letter of Intent re: Proposed Acquisition of Assets between Rob
Bleyl d.b.a. Disaster Plus and Venturi Technology Enterprises,
Inc. dated 7-22-98
10.34 Letter of Intent re: Proposed Acquisition of Duct Cleaning
Business of Bob L. Allen
10.35 Stock Purchase Agreement between CDL Capital Corp., CDL Emerging
Growth Equity Fund I, L.L.C., Gaylord Karren and John Hopkins, and
Venturi Technology Enterprises dated 4-10-98
10.36 Placement Agreement of Venturi Technology Enterprises, Inc. with
Equity Services, Ltd. dated 12-31-97
II-10
<PAGE> 82
10.37 Investor Subscription Agreement of Venturi Technology Enterprises,
Inc. with Entrepreneurial Investors, Ltd. dated 12-31-97
10.38 Soliciting Dealer Agreement between Dominion Capital and Venturi
Technologies, Inc. dated 8-9-96
10.39 Agreement and Plan of Reorganization of Venturi Technologies, Inc.
and HiTek Carpet Care Inc. dated 5-15-97
10.40 Stock-for-Stock Reorganization Agreement between HiTek Carpet
Care, Inc. and shareholders of Venturi Technologies, Inc. dated
6-9-97
10.41 Promissory Note between HiTek Carpet Care, Inc. and Venturi
Technologies, Inc. dated 5-31-97
10.42 Business and Financial Advisory Agreement between CDL Capital
Corp. And Venturi Technology Enterprises, Inc. dated 3-10-98
10.43 Application for Certificate of Authority to Transact Business in
Texas by Venturi Technology Enterprises, Inc.
21.0 Subsidiaries of Venturi Technologies, Inc.
23.0 Consent of Mackey Price & Williams dated 7-29-98
23.1 Consent of Independent Accountants dated 7-21-98
ITEM 28. UNDERTAKINGS
A. Undertaking pursuant to Rule 415.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
to:
(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof), which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) Include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment will be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time will be
deemed to be the initial bona fide offering thereof.
II-11
<PAGE> 83
(3) To remove from registration, by means of a post-effective
amendment, any of the securities being registered that remain unsold at
the termination of the offering.
B. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and other agents of the
Company, the Company has been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-12
<PAGE> 84
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Orem,
Utah, as of the 28th day of July, 1998.
VENTURI TECHNOLOGIES, INC.
By: /s/ Gaylord Karren
--------------------------------
Gaylord Karren, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement was signed by the following persons in the capacities and on the dates
stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
Chairman of the Board
/s/ Gaylord Karren Chief Executive Officer and Director
- -------------------------------
/s/ John Hopkins President and Director
- -------------------------------
/s/ Merril L. Littlewood Chief Financial Officer
- ------------------------------- and Treasurer
/s/ Kim Peterson Controller
- -------------------------------
</TABLE>
<PAGE> 85
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.0 Articles of Incorporation of Venturi Technologies, Inc. (Nevada),
as amended
3.1 Bylaws of Venturi Technologies, Inc.
3.2 Amended and Restated Articles of Incorporation of Venturi
Technologies, Inc. (Texas) dated 5-23-96
3.3 Articles of Incorporation of Action Venturi Technology, Inc. dated
8-15-94
3.4 Bylaws of Action Venturi Technology, Inc.
3.5 Articles of Incorporation of T-Co Manufacturing, Inc. dated 5-8-97
4.0 Specimen Stock Certificate
4.1 Articles of Incorporation of Venturi Technologies, Inc. (Nevada),
as amended pp. 4-5 (See above Exhibit 3.0)
4.2 Bylaws of Venturi Technologies, Inc., pp. 12-13 (See above
Exhibit 3.1)
4.3 Certificate of Designation of Preferences, Limitations, and
Relative Rights for Venturi Technology Enterprises, Inc. for
Series A and Series B Preferred Stock dated 12-24-97
4.4 Action by Unanimous Written Consent of the Board of Directors of
Venturi Technologies Inc. Creating Series C Preferred Stock dated
7-98 with Exhibit
4.5 Registration Rights Agreement with Equity Services, Ltd. dated
12-31-97
4.6 Registration Rights Agreement with Entrepreneurial Investors, Ltd.
dated 12-31-97
4.7 Lock Up Agreement with Equity Services, Ltd. dated 12-23-97
4.8 Lock Up Agreement with Invest Linc Emerging Growth Equity Fund I,
L.L.C. dated 7- 28-98
4.9 Master Equipment Financing Agreement with Sentry Financial Corp.
dated 6-18-96
4.10 Master Lease Agreement with Northstar Capital LLC dated 2-17-98
5.0 Opinion Letter of Mackey Price & Williams Regarding Legality of
Securities dated 7- 29-98
10.0 Dual Stock Option Plan between Venturi Technology Enterprises,
Inc. and its key employees, officers, directors and consultants
dated 7-97
10.1 Form Incentive Stock Option Agreement between Venturi Technology
Enterprises, Inc. and its employees dated 1-1-97
10.2 Form Non-Statutory Stock Option Agreement between Venturi
Technology Enterprises, Inc. and its consultants dated 7-1-97
10.3 Non-Statutory Stock Option Agreement between Venturi Technology
Enterprises, Inc. and Merril Littlewood dated 7-1-97
10.4 Requirements Agreement with DT Enterprises dated 2-15-96
10.5 Exclusive Use and Purchase Agreement between Primacide, LLC and
Venturi Technologies, Inc.
10.6 Placement Agent's Option Certificate with Equity Services, Ltd.
dated 6-30-98
10.7 Agreement of Collateral between Gaylord Karren and John Hopkins
and HiTek Carpet Care Inc. dated 3-97
10.8 Patent Application Assignment between John M. Hopkins and Venturi
Technology Enterprises, Inc. dated 12-22-97
10.9 Patent Application Assignment between Gaylord Karren and Venturi
Technology Enterprises, Inc. dated 12-22-97
10.10 Patent Assignment between John M. Hopkins and Venturi Technology
Enterprises, Inc. dated 12-22-97
10.11 Verified Statement Claiming Small Entity Status by John M. Hopkins
dated 3-17-97
10.12 Verified Statement Claiming Small Entity Status by Gaylord Karren
dated 3-17-97
10.13 Master Equipment Financing Agreement with Sentry Financial Corp.
dated 6-18-96 (See above Exhibit 4.9)
10.14 Master Lease Agreement with Northstar Capital LLC dated 2-17-98
(See above Exhibit 4.10)
10.15 Warrant Purchase Agreement between Northstar Capital, LLC and
Venturi Technology Enterprises, Inc. dated 2-17-98
10.16 Letter from Capital Partners Extending Lease Funding to Venturi
Technology Enterprises, Inc. dated 5-7-98
<PAGE> 86
10.17 Agreement of Purchase and Sale of Assets between Bill Thomas,
d.b.a. T-Co Carpet Cleaning and T-Co Heating Systems, and Venturi
Technologies, Inc. dated 3-96
10.18 Agreement of Purchase and Sale of Assets between Michael
Shurtliff, d.b.a. Protech Carpet Cleaning and Flood Restoration,
and Venturi Technology Enterprises, Inc. dated 3-31-98
10.19 Bill of Sale and Assignment between Michael Shurtliff, d.b.a.
Protech Carpet Cleaning and Flood Restoration, and Venturi
Technology Enterprises, Inc.
10.20 Liabilities Undertaking between Michael Shurtliff, d.b.a. Protech
Carpet Cleaning and Flood Restoration, and Venturi Technology
Enterprises, Inc. dated 4-98
10.21 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Michael Shurtliff, d.b.a. Protech
Carpet Cleaning and Flood Restoration, and Venturi Technology
Enterprises, Inc. dated 4-98
10.22 Agreement of Purchase and Sale of Assets between Reed T. And Lana
B. Buley, d.b.a. Complete Carpet Service, and Venturi Technology
Enterprises, Inc. dated 4-30-98
10.23 Bill of Sale and Assignment between Reed T. and Lana B. Buley and
d.b.a. Complete Carpet Service Venturi Technology Enterprises,
Inc.
10.24 Liabilities Undertaking between Reed T. and Lana B. Buley d.b.a.
Complete Carpet Service and Venturi Technology Enterprises, Inc.
dated 4-98
10.25 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Reed T. and Lana B. Buley d.b.a.
Complete Carpet Service and Venturi Technology Enterprises, Inc.
dated 4-98
10.26 Letter of Intent re: Proposed Acquisition by Venturi Technology
Enterprises, Inc. of Carpet and Upholstery Cleaning Assets of
Daniel M. Levine
10.27 Agreement of Purchase and Sale of Assets between Daniel M. and
Kathleen L. Levine, d.b.a. All Valley Carpet, All Valley Carpet &
Upholstery and All Valley Restoration Service, and Venturi
Technology Enterprises dated 7-3-98
10.28 Bill of Sale and Assignment between Daniel M. and Kathleen L.
Levine, d.b.a. All Valley Carpet, All Valley Carpet & Upholstery
and All Valley Restoration Service, and Venturi Technology
Enterprises, Inc.
10.29 Liabilities Undertaking between Daniel M. Levine, d.b.a. All
Valley Carpet, All Valley Carpet & Upholstery and All Valley
Restoration Service, and Venturi Technology Enterprises dated
7-3-98
10.30 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Daniel M. Levine and Venturi
Technology Enterprises dated 7-3-98
10.31 Agreement of Purchase and Sale of Assets between Video Aire and
Venturi Technology Enterprises, Inc. dated 6-30-98
10.32 Letter of Intent re: Proposed Acquisition of Assets between Dirt
Free Carpet & Upholstry [sic] Cleaning Inc. and Venturi Technology
Enterprises dated 6-29-98
10.33 Letter of Intent re: Proposed Acquisition of Assets between Rob
Bleyl d.b.a. Disaster Plus and Venturi Technology Enterprises,
Inc. dated 7-22-98
10.34 Letter of Intent re: Proposed Acquisition of Duct Cleaning
Business of Bob L. Allen
10.35 Stock Purchase Agreement between CDL Capital Corp., CDL Emerging
Growth Equity Fund I, L.L.C., Gaylord Karren and John Hopkins, and
Venturi Technology Enterprises dated 4-10-98
10.36 Placement Agreement of Venturi Technology Enterprises, Inc. with
Equity Services, Ltd. dated 12-31-97
<PAGE> 87
10.37 Investor Subscription Agreement of Venturi Technology Enterprises,
Inc. with Entrepreneurial Investors, Ltd. dated 12-31-97
10.38 Soliciting Dealer Agreement between Dominion Capital and Venturi
Technologies, Inc. dated 8-9-96
10.39 Agreement and Plan of Reorganization of Venturi Technologies, Inc.
and HiTek Carpet Care Inc. dated 5-15-97
10.40 Stock-for-Stock Reorganization Agreement between HiTek Carpet
Care, Inc. and shareholders of Venturi Technologies, Inc. dated
6-9-97
10.41 Promissory Note between HiTek Carpet Care, Inc. and Venturi
Technologies, Inc. dated 5-31-97
10.42 Business and Financial Advisory Agreement between CDL Capital
Corp. And Venturi Technology Enterprises, Inc. dated 3-10-98
10.43 Application for Certificate of Authority to Transact Business in
Texas by Venturi Technology Enterprises, Inc.
21.0 Subsidiaries of Venturi Technologies, Inc.
23.0 Consent of Mackey Price & Williams dated 7-29-98
23.1 Consent of Independent Accountants dated 7-21-98
<PAGE> 1
Exhibit 3.0
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
HITEK CARPET CARE, INC.
Pursuant to NRS 78.385 and 78.390, the undersigned President and Secretary
of HiTek Carpet Care, Inc. do hereby certify:
That the following amendments to the articles of incorporation were
unanimously approved by the Board of Directors of said corporation by written
consent in lieu of a special, meeting of the Board of Directors dated July 1,
1997 and by a majority of the outstanding shares entitled to vote.
Article I is hereby amended to read as follows.
The exact name of this Corporation is Venturi Enterprises, Inc.
This Certificate of Amendment to the Articles of Incorporation may be
signed in two or more counterparts.
-----------------------------------
John Hopkins, President
/s/ Randy Johnson
-----------------------------------
Randy Johnson, Secretary
State of )
-------------------
)ss.
County of )
------------------
On the ____ day of _____________, 1997, personally appeared before me, a Notary
Public, John Hopkins, President of the above mentioned Corporation, who
acknowledged that he executed the above instrument.
------------------------------------
Signature of Notary
(Notary stamp or seal)
<PAGE> 2
State of UTAH )
) ss.
County of Salt Lake )
On the lst day of July , 1997, personally appeared before me, a Notary Public,
Randy Johnson Secretary of the above mentioned Corporation, who acknowledged
that he executed the above instrument.
/s/ David J. Shaw
-------------------
Signature of Notary
(Notary stamp or seal)
2
<PAGE> 3
ARTICLES OF INCORPORATION
OF
HITEK CARPET CARE, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated
ourselves together for the purpose of forming a Corporation under and pursuant
to the laws of the State of Nevada, and we do hereby certify that:
ARTICLE I - NAME: The exact name of this Corporation is:
HiTek Carpet Care, Inc.
ARTICLE II - RESIDENT AGENT:
The Resident Agent of the Corporation is Max C. Tanner, Esq., The Law
Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada
89121.
ARTICLE III - DURATION: The Corporation shall have perpetual existence.
ARTICLE IV - PURPOSES: The purpose, object and nature of the business for which
this Corporation is organized are:
(a) To engage in any lawful activity;
(b) To carry on such business as may be necessary, convenient, or
desirable to accomplish the above purposes, and to do all
other things incidental thereto which are not forbidden by law
or by these Articles of Incorporation.
ARTICLE V - POWERS: The powers of the Corporation shall be those powers granted
by 78.060 and 78.070 of the Nevada Revised Statutes under which this corporation
is formed. In addition, the Corporation shall have the following specific
powers:
(a) To elect or appoint officers and agents of the Corporation and
to fix their compensation;
(b) To act as an agent for any individual, association,
partnership, corporation or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of the
ownership or possession thereof, sell, or otherwise dispose
of, shares or other interests in, or obligations of,
individuals, associations, partnerships, corporations, or
governments;
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(d) To receive, acquire, hold, pledge, transfer, or otherwise
dispose of shares of the corporation, but such shares may only
be purchased, directly or indirectly, out of earned surplus;
(e) To make gifts or contributions for the public welfare or for
charitable, scientific or educational purposes, and in time of
war, to make donations in aid of war activities.
ARTICLE VI - CAPITAL STOCK:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 25,000,000 shares of Capital
Stock at $.001 par value per share as set forth in subsections (a)
and (b) of this Section I of Article VI.
(a) The total number of shares of Common Stock which this
Corporation is authorized to issue is 20,000,000 shares at
$.001 par value per share.
(b) The total number of shares of Preferred Stock which this
Corporation is authorized to issue is 5,000,000 shares at
$.001 par value per share, which Preferred Stock may contain
special preferences as determined by the Board of Directors of
the Corporation, including, but not limited to, the bearing of
interest and convertibility into shares of Common Stock of the
Corporation.
Section 2. Voting Rights of Shareholders. Each holder of the Common
Stock shall be entitled to one vote for each share of stock standing
in his name on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be
issued for such consideration, as shall be fixed from time to time
by the Board of Directors. In the absence of fraud, the judgment of
the Directors as to the value of any property for shares shall be
conclusive. When shares are issued upon payment of the consideration
fixed by the Board of Directors, such shares shall be taken to be
fully paid stock and shall be non-assessable. The Articles shall not
be amended in this particular.
Section 4. Pre-emptive Rights. Except as may otherwise be provided
by the Board of Directors, no holder of any shares of the stock of
the Corporation, shall have any preemptive right to purchase,
subscribe for, or otherwise acquire any shares of stock of the
Corporation of any class now or hereafter authorized, or any
securities exchangeable for or convertible into such shares, or any
warrants or other instruments evidencing rights or options to
subscribe for, purchase, or otherwise acquire such shares.
Section 5. Stock Rights and Options. The Corporation shall have the
power to create and issue rights, warrants, or options entitling the
holders thereof to purchase from the corporation any shares of its
capital stock of any class or classes, upon such terms and
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conditions and at such times and prices as the Board of Directors may
provide, which terms and conditions shall be incorporated in an
instrument or instruments evidencing such rights. In the absence of
fraud, the judgment of the Directors as to the adequacy of
consideration for the issuance of such rights or options and the
sufficiency thereof shall be conclusive.
ARTICLE VII - ASSESSMENT OF STOCK: The capital stock of this Corporation, after
the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid, shall ever be
assessable or assessed. The holders of such stock shall not be individually
responsible for the debts, contracts, or liabilities of the Corporation and
shall not be liable for assessments to restore impairments in the capital of the
Corporation.
ARTICLE VIII - DIRECTORS: For the management of the business, and for the
conduct of the affairs of the Corporation, and for the future definition,
limitation, and regulation of the powers of the Corporation and its directors
and shareholders, it is further provided:
Section 1. Size of Board. The members of the governing board
of the Corporation shall be styled directors. The number of
directors of the Corporation, their qualifications, terms of
office, manner of election, time and place of meeting, and
powers and duties shall be such as are prescribed by statute
and in the bylaws of the Corporation. The name and post office
address of the directors constituting the first board of
directors, which shall be One (1) in number are:
NAME ADDRESS
Max C. Tanner 2950 East Flamingo Road
Suite G
Las Vegas, NV 89121
Section 2. Powers of Board. In furtherance and not in
limitation of the powers conferred by the laws of the State of
Nevada, the Board of Directors is expressly authorized and
empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to
the power of the shareholders to alter or repeal the
By-Laws made by the Board of Directors.
(b) Subject to the applicable provisions of the By-Laws then
in effect, to determine, from time to time, whether and
to what extent, and at what times and places, and under
what conditions and regulations, the accounts and books
of the Corporation, or any of them, shall be open to
shareholder inspection. No shareholder shall have any
right to inspect any of the accounts, books or documents
of the Corporation, except as permitted by
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law, unless and until authorized to do so by resolution
of the Board of Directors or of the Shareholders of the
Corporation;
(c) To issue stock of the Corporation for money, property,
services rendered, labor performed, cash advanced,
acquisitions for other corporations or for any other
assets of value in accordance with the action of the
board of directors without vote or consent of the
shareholders and the judgment of the board of directors
as to value received and in return therefore shall be
conclusive and said stock, when issued, shall be fully
paid and non-assessable.
(d) To authorize and issue, without shareholder consent,
obligations of the Corporation, secured and unsecured,
under such terms and conditions as the Board, in its
sole discretion, may determine, and to pledge or
mortgage, as security therefore, any real or personal
property of the Corporation, including after-acquired
property;
(e) To determine whether any and, if so, what part, of the
earned surplus of the Corporation shall be paid in
dividends to the shareholders, and to direct and
determine other use and disposition of any such earned
surplus;
(f) To fix, from time to time, the amount of the profits H
of the Corporation to be reserved as working capital or
for any other lawful purpose;
(g) To establish bonus, profit-sharing, stock option, or
other types of incentive compensation plans for the
employees, including officers and directors, of the
Corporation, and to fix the amount of profits to be
shared or distributed, and to determine the persons to
participate in any such plans and the amount of their
respective participations.
(h) To designate, by resolution or resolutions passed by a
majority of the whole Board, one or more committees,
each consisting of two or more directors, which, to the
extent permitted by law and authorized by the resolution
or the By-Laws, shall have and may exercise the powers
of the Board;
(i) To provide for the reasonable compensation of its own
members by By-Law, and to fix the terms and conditions
upon which such compensation will be paid;
(j) In addition to the powers and authority herein before,
or by statute, expressly conferred upon it, tire Board
of Directors may exercise all such powers and do all
such acts and things as may be exercised or done by the
corporation, subject, nevertheless, to the provisions of
the laws of the State
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of Nevada, of these Articles of Incorporation, and of
the By-Laws of the Corporation.
Section 3. Interested Directors. No contract or transaction
between this Corporation and any of its directors, or between
this Corporation and any other corporation, firm, association,
or other legal entity shall be invalidated by reason of the
fact that the director of the Corporation has a direct or
indirect interest, pecuniary or otherwise, in such
corporation, firm, association, or legal entity, or because
the interested director was present at the meeting of the
Board of Directors which acted upon or in reference to such
contract or transaction, or because he participated in such
action, provided that: (1) the interest of each such director
shall have been disclosed to or known by the Board and a
disinterested majority of the Board shall have nonetheless
ratified and approved such contract or transaction (such
interested director or directors may be counted in determining
whether a quorum is present for the meeting at which such
ratification or approval is given); or (2) the conditions of
N.R.S. 78.140 are met.
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The
personal liability of a director or officer of the corporation to the
corporation or the Shareholders for damages for breach of fiduciary duty as a
director or officer shall be limited to acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law.
ARTICLE X - INDEMNIFICATION: Each director and each officer of the corporation
may be indemnified by the corporation as follows:
(a) The corporation may indemnify any person who was or is a
party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right
of the corporation), by reason of the fact that he is or
was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him in
connection with the action, suit or proceeding, if he
acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests
of the corporation and with respect to any criminal
action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action,
suite or proceeding, by judgment, order, settlement,
conviction or upon a plea of nolo contenders or its
equivalent, does not of itself create a presumption that
the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to
the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was
unlawful.
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(b) The corporation may indemnify any person who was or is a
party, or is threatened to be made a party, to any
threatened, pending or completed action or suit by or in
the right of the corporation, to procure a judgment in
its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation
as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses including amounts paid in
settlement and attorneys' fees actually and reasonably
incurred by him in connection with the defense or
settlement of the action or suit, if he acted in good
faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the
corporation. Indemnification may not be made for any
claim, issue or matter as to which such a person has
been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals there from, to be liable
to the corporation or for amounts paid in settlement to
the corporation, unless and only to the extent that the
court in which the action or suit was brought or other
court of competent jurisdiction determines upon
application that in view of all the circumstances of the
case the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
(c) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits
or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of
this Article, or in defense of any claim, issue or
matter therein, he must be indemnified by the
corporation against expenses, including attorney's fees,
actually and reasonably incurred by him in connection
which the defense.
(d) Any indemnification under subsections (a) and (b) unless
ordered by a court or advanced pursuant to subsection
(e), must be made by the corporation only as authorized
in the specific case upon a determination that
indemnification of the director, officer, employee or
agent is proper in the circumstances. The determination
must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a
quorum consisting of directors who were not
parties to the act, suit or proceeding;
(iii) If a majority vote of a quorum consisting of
directors who were not parties to the act, suit or
proceeding so orders, by independent legal counsel
in a written opinion; or
(iv) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be
obtained, by independent legal counsel in a
written opinion.
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(e) Expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the corporation
as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on
behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he
is not entitled to be indemnified by the corporation. The provisions
of this subsection do not affect any rights to advancement of
expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled
under the certificate or articles of incorporation or any
bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court
pursuant to subsection (b) or for the advancement of expenses
made pursuant to subsection (e) may not be made to or on
behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was
material to the cause of action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS: Subject to the laws of the
State of Nevada, the shareholders and the Directors shall have power to hold
their meetings, and the Directors shall have power to have an office or offices
and to maintain the books of the Corporation outside the State of Nevada, at
such place or places as may from time to time be designated in the By-Laws or by
appropriate resolution.
ARTICLE XII - AMENDMENT OF ARTICLES: The provisions of these Articles of
Incorporation may be amended, altered or repealed from time to time to the
extent and in the manner prescribed by the laws of the State of Nevada, and
additional provisions authorized by such laws as are then in force may be added.
All rights herein conferred on the directors, officers and shareholders are
granted subject to this reservation.
ARTICLE XIII - INCORPORATOR: The name and address of the sole incorporator
signing these Articles of Incorporation is as follows:
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NAME POST OFFICE ADDRESS
Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 29th day of January, 1997.
/s/ Max C. Tanner
-----------------
Max C. Tanner
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
On January 29, 1997, personally appeared before me, a Notary Public,
Max C. Tanner, who acknowledged to me that he executed the foregoing Articles of
Incorporation for HiTek Carpet Care, Inc., a Nevada corporation.
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Exhibit 3.1
BY-LAWS OF
HITEK CARPET CARE, INC.
ARTICLE I
SHAREHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the shareholders
shall be held at such date and time as shall be designated by the board of
directors and stated in the notice of the meeting or in a duly-executed waiver
of notice thereof. If the corporation shall fail to provide notice of the annual
meeting of the shareholders as set forth above, the annual meeting of the
shareholders of the corporation shall be held during the month of November or
December of each year as determined by the Board of Directors, for the purpose
of electing directors of the corporation to serve during the ensuing year and
for the transaction of such other business as may properly come before the
meeting. If the election of the directors is not held on the day designated
herein for any annual meeting of the shareholders, or at any adjournment
thereof, the president shall cause the election to be held at a special meeting
of the shareholders as soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the shareholders may
be called by the president or the Board of Directors and shall be called by the
president at the written request of the holders of not less than 51% of the
issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be
transacted at any special meeting at any adjournment thereof. However, no
business shall be acted upon at a special meeting, except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock of
the corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the shareholders of the
corporation may be held at its principal office in the State of Nevada or such
other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote may
designate any place for the holding of such meeting.
Section 1.04 Notice of Meetings.
(a) The secretary shall sign and deliver to all shareholders
of record written or printed notice of any meeting at least ten (10)
days, but not more than sixty (60) days, before the date of such
meeting; which notice shall state the place, date and time of the
meeting, the general nature of the business to be transacted, and,
in the case of any
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meeting at which directors are to be elected, the names of nominees, if
any, to be presented for election.
(b) In the case of any meeting, any proper business may be presented
for action, except that the following items shall be valid only if the
general nature of the proposal is stated in the notice or written waiver
of notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or another firm,
association, or corporation in which one or more of its directors
has a material financial interest;
(2) Adoption of amendments to the Articles of Incorporation;
or
(3) Action with respect to the merger, consolidation,
reorganization, partial or complete liquidation, or dissolution of
the corporation.
(c) The notice shall be personally delivered or mailed by first
class mail to each shareholder of record at the last known address
thereof, as the same appears on the books of the corporation, and the
giving of such notice shall be deemed delivered the date the same is
deposited in the United States mail, postage prepaid. If the address of
any shareholder does not appear upon the books of the corporation, it will
be sufficient to address any notice to such shareholder at the principal
office of the corporation.
(d) The written certificate of the person calling any meeting, duly
sworn, setting forth the substance of the notice, the time and place the
notice was mailed or personally delivered to the several shareholders, and
the addresses to which the notice was mailed shall be prima facie evidence
of the manner and fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the shareholders shall meet in person or by proxy, such meeting
shall be valid for all purposes without call or notice, and at such meeting any
corporate action may be taken.
Section 1.06 Determination of Shareholders of Record.
(a) The Board of Directors may at any time fix a future date
as a record date for the determination of the shareholders entitled to
notice of any meeting or to vote or entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled
to exercise any rights in respect of any other lawful action. The
record date so fixed shall not be more than sixty (60) days prior to
the date of such meeting nor more than sixty (60) days prior to any
other action. When a record date is so fixed, only shareholders of
record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution or allotment of
rights, or to exercise their rights, as
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the case may be, notwithstanding any transfer of any shares on the books
of the corporation after the record date.
(b) If no record date is fixed by the Board of Directors, then (1)
the record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held; (2) the record date for determining
shareholders entitled to give consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which written consent is given; and (3) the
record date for determining shareholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts
the resolution relating thereto, or the sixtieth (60th) day prior to the
date of such other action, whichever is later.
Section 1.07 Quorum: Adjourned Meetings.
(a) At any meeting of the shareholders, a majority of the issued and
outstanding shares of the corporation represented in person or by proxy,
shall constitute a quorum.
(b) If less than a majority of the issued and outstanding shares are
represented, a majority of shares so represented may adjourn from time to
time at the meeting, until holders of the amount of stock required to
constitute a quorum shall be in attendance. At any such adjourned meeting
at which a quorum shall be present, any business may be transacted which
might have been transacted as originally called. When a shareholders'
meeting is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, unless the adjournment is for
more than ten (10) days in which event notice thereof shall be given.
Section 1.08 Voting.
(a) Each shareholder of record, such shareholder's duly authorized
proxy or attorney-in-fact shall be entitled to one (1) vote for each share
of stock standing registered in such shareholder's name on the books of
the corporation on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's
duly authorized proxy or attorney-in-fact. With respect to shares held by
a representative of the estate of a deceased shareholder, guardian,
conservator, custodian or trustee, votes may be cast by such holder upon
proof of capacity, even though the shares do not stand in the name of such
holder. In the case of shares under the control of a receiver, the
receiver may cast votes carried
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by such shares even though the shares do not stand in the name of the
receiver provided that the order of the court of competent jurisdiction
which appoints the receiver contains the authority to cast votes carried
by such shares. If shares stand in the name of a minor, votes may be cast
only by the duly-appointed guardian of the estate of such minor if such
guardian has provided the corporation with written notice and proof of
such appointment.
(c) With respect to shares standing in the name of a corporation on
the record date, votes may be cast by such officer or agents as the
by-laws of such corporation prescribe or, in the absence of an applicable
by-law provision, by such person as may be appointed by resolution of the
Board of Directors of such corporation. In the event no person is so
appointed, such votes of the corporation may be cast by any person
(including the officer making the authorization) authorized to do so by
the Chairman of the Board of Directors, President or any Vice President of
such corporation.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast by shares owned by this corporation or its subsidiaries,
if any. If shares are held by this corporation or its subsidiaries, if
any, in a fiduciary capacity, no votes shall be cast with respect thereto
on any matter except to the extent that the beneficial owner thereof
possesses and exercises either a right to vote or to give the corporation
holding the same binding instructions on how to vote.
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a shareholder
voting agreement or otherwise and shares held by two or more persons
(including proxy holders) having the same fiduciary relationship respect
in the same shares, votes may be cast in the following manner:
(1) If only one such person votes, the votes of such person binds
all.
(2) If more than one person casts votes, the act of the majority so
voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast
proportionately as split.
(f) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case
of elections of directors. If such holder entitled to vote fails to
specify the number of affirmative votes, it will be conclusively presumed
that the holder is casting affirmative votes with respect to all shares
held.
(g) If a quorum is present, the affirmative vote of holders of a
majority of the shares represented at the meeting and entitled to vote on
any matter shall be the act of the
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shareholders, unless a vote of greater number or voting by classes is
required by the laws of the State of Nevada, the Articles of Incorporation
and these By-Laws.
Section 1.09 Proxies. At any meeting of shareholders, any holder of
shares entitled to vote may authorize another person or persons to vote by proxy
with respect to the shares held by an instrument in writing and subscribed to by
the holder of such shares entitled to vote. No proxy shall be valid after the
expiration of six (6) months from the date of execution thereof, unless coupled
with an interest or unless otherwise specified in the proxy. In no event shall
the term of a proxy exceed seven (7) years from the date of its execution. Every
proxy shall continue in full force and effect until its expiration or
revocation. Revocation may be effected by filing an instrument revoking the same
or a duly-executed proxy bearing a later date with the secretary of the
corporation.
Section 1.10 Order of Business. At the annual shareholders meeting, the
regular order of business shall be as follows:
(1) Determination of shareholders present and existence of
quorum;
(2) Reading and approval of the minutes of the previous
meeting or meetings;
(3) Reports of the Board of Directors, the president,
treasurer and secretary of the corporation, in the order
named;
(4) Reports of committee;
(5) Election of directors;
(6) Unfinished business;
(7) New business;
(8) Adjournment.
Section 1.11 Absentees Consent to Meetings. Transactions of any meeting
of the shareholders are as valid as though had at a meeting duly-held after
regular call and notice if a quorum is present, either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at
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a meeting shall constitute a waiver of notice of such meeting, except when the
person objects at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice if such objection is
expressly made at the beginning. Neither the business to be transacted at nor
the purpose of any regular or special meeting of shareholders need be specified
in any written waiver of notice, except as otherwise provided in Section 1.04(b)
of these By-Laws.
Section 1.12 Action Without Meeting. Any action which may be taken by
the vote of the shareholders at a meeting may be taken without a meeting if
consented to by the holders of a majority of the shares entitled to vote or such
greater proportion as may be required by the laws of the State of Nevada, the
Articles of Incorporation, or these By-Laws. Whenever action is taken by written
consent, a meeting of shareholders needs not be called or noticed.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure and Qualification. Except as otherwise
provided herein, the Board of Directors of the corporation shall consist of at
least one (1) but no more than nine (9) persons, who shall be elected at the
annual meeting of the shareholders of the corporation and who shall hold office
for one (1) year or until their successors are elected and qualify.
Section 2.02 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, or the
secretary of the corporation, unless the notice specifies a later time for
effectiveness of such resignation. If the Board of Directors accents the
resignation of a director tendered to take effect at a future date, the Board or
the shareholders may elect a successor to take office when the resignation
becomes effective.
Section 2.03 Reduction in Number. No reduction of the number of
directors shall have the effect of removing any director prior to the expiration
of his term of office.
Section 2.04 Removal.
(a) The Board of Directors or the shareholders of the
corporation, by a majority vote, may declare vacant the office of a
director who has been declared incompetent by an order of a court of
competent jurisdiction or convicted of a felony.
Section 2.05 Vacancies.
(a) A vacancy in the Board of Directors because of death,
resignation, removal, change in number of directors, or otherwise may
be filled by the shareholders at any regular or special meeting or any
adjourned meeting thereof or the remaining director(s) by the
affirmative vote of a majority thereof. A Board of Directors consisting
of less than
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the maximum number authorized in Section 2.01 of ARTICLE II constitutes
vacancies on the Board of Directors for purposes of this paragraph and
may be filled as set forth above including by the election of a
majority of the remaining directors. Each successor so elected shall
hold office until the next annual meeting of shareholders or until a
successor shall have been duly-elected and qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the shareholders
shall constitute less than a majority of the directors then in office,
any holder or holders of an aggregate of five percent (5%) or more of
the total number of shares entitled to vote may call a special meeting
of shareholders to be held to elect the entire Board of Directors. The
term of office of any director shall terminate upon such election of a
successor.
Section 2.06 Regular Meetings. Immediately following the adjournment
of, and at the same place as, the annual meeting of the shareholders, the Board
of Directors, including directors newly elected, shall hold its annual meeting
without notice, other than this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
Section 2.07 Special Meetings. Special meetings of the Board of
Directors may be called by the chairman and shall be called by the chairman upon
the request of any two (2) directors or the president of the corporation.
Section 2.08 Place of Meetings. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any place
for the holding of such meeting.
Section 2.09 Notice of Meetings. Except as otherwise provided in
Section 2.06, the chairman shall deliver to all directors written or printed
notice of any special meeting, at least three (3) days before the date of such
meeting, by delivery of such notice personally or mailing such notice first
class mail, or by telegram. If mailed, the notice shall be deemed delivered two
(2) business days following the date the same is deposited in the United States
mail, postage prepaid. Any director may waive notice of any meeting, and the
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, unless such attendance is for the express purpose of objecting to
the transaction of business threat because the meeting is not properly called or
convened.
Section 2.10 Quorum: Adjourned Meetings.
(a) A majority of the Board of Directors in office shall
constitute a quorum.
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(b) At any meeting of the Board of Directors where a quorum is
not present, a majority of those present may adjourn, from time to
time, until a quorum is present, and no notice of such adjournment
shall be required. At any adjourned meeting where a quorum is present,
any business may be transacted which could have been transacted at the
meeting originally called.
Section 2.11 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if a written consent thereto is signed by all of
the members of the Board of Directors or of such committee. Such written consent
or consents shall be filed with the minutes of the proceedings of the Board of
Directors or committee. Such action by written consent shall have the same force
and effect as the unanimous vote of the Board of Directors or committee.
Section 2.12 Telephonic Meetings. Meetings of the Board of Directors
may be held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such a meeting constitutes
presence in person at such meeting.
Section 2.13 Board Decisions. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 2.14 Powers and Duties.
(a) Except as otherwise provided in the Articles of
Incorporation or the laws of the State of Nevada, the Board of
Directors is invested with the complete and unrestrained authority to
manage the affairs of the corporation, and is authorized to exercise
for such purpose as the general agent of the corporation, its entire
corporate authority in such manner as it sees fit. The Board of
Directors may delegate any of its authority to manage, control or
conduct the current business of the corporation to any standing or
special committee or to any officer or agent and to appoint any persons
to be agents of the corporation with such powers, including the power
to sub-delegate, and upon such terms as may be deemed fit.
(b) The Board of Directors shall present to the shareholders
at annual meetings of the shareholders, and when called for by a
majority vote of the shareholders at a special meeting of the
shareholders, a full and clear statement of the condition of the
corporation, and shall, at request, furnish each of the shareholders
with a true copy thereof.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of
the shareholders or any special meeting properly called for the purpose
of considering any such contract or act, provided a quorum is present.
The contract or act shall be valid and binding upon the corporation
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and upon all the shareholders thereof, if approved and ratified by the
affirmative vote of a majority of the shareholders at such meeting.
(d) In furtherance and not in limitation of the powers
conferred by the laws of the State of Nevada, the Board of Directors is
expressly authorized and empowered to issue stock of the Corporation
for money, property, services rendered, labor performed, cash advanced,
acquisitions for other corporations or for any other assets of value in
accordance with the action of the Board of Directors without vote or
consent of the shareholders and the judgment of the Board of Directors
as to the value received and in return therefore shall be conclusive
and said stock, when issued, shall be fully-paid and non-assessable.
Section 2.15 Compensation. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board.
Section 2.16 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect,
from among its members, a chairman to preside at the meetings of the
Board of Directors. The Board of Directors may also elect such other
board officers and for such term as it may, from time to time,
determine advisable.
(b) Any vacancy in any board office because of death,
resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
Section 2.17 Order of Business. The order of business at any meeting of
the Board of Directors shall be as follows:
(1) Determination of members present and existence of
quorum;
(2) Reading and approval of the minutes of any previous
meeting or meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
(7) Adjournment.
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ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and until
their successors are elected and qualify. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more vice presidents, assistant secretaries, assistant treasurers and
transfer agents of the corporation as it may deem advisable; prescribe their
duties; and fix their compensation.
Section 3.02 Removal: Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgment, the best interest of the corporation would be served thereby. Any
officer may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to which
the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President. The president shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The president shall preside
at all meetings of the shareholders and shall sign the certificates of stock
issued by the corporation, and shall perform such other duties as shall be
prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to act
and to vote at any meetings of the shareholders of any corporation in which the
corporation may hold stock and, at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock.
The Board of Directors, by resolution from time to time, may confer like powers
on any person or persons in place of the president to represent the corporation
for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or
more vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the vice president shall perform such other duties as shall be prescribed by
the Board of Directors.
Section 3.06 Secretary. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall attend to the giving and service of all
notices of the corporation, may sign with the president in
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the name of the corporation all contracts authorized by the Board of Directors
or appropriate committee, shall have the custody of the corporate seal, shall
affix the corporate seal to all certificates of stock duly issued by the
corporation, shall have charge of stock certificate books, transfer books and
stock ledgers, and such other books and papers as the Board of Directors or
appropriate committee may direct, and shall, in general perform all duties
incident to the office of the secretary. All corporate books kept by the
secretary shall be open for examination by any director at any reasonable time.
Section 3.07 Assistant Secretary. The Board of Directors may appoint an
assistant secretary who shall have such powers and perform such duties as may be
prescribed for him by the secretary of the corporation or by the Board of
Directors.
Section 3.08 Treasurer. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer shall sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these By-laws or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter regularly in the books of the corporation, to be kept for
that purpose, full and accurate accounts of all monies received and paid on
account of the corporation and whenever required by the Board of Directors, the
treasurer shall render a statement of any or all accounts. The treasurer shall
at all reasonable times exhibit the books of account to any directors of the
corporation and shall perform all acts incident to the position of treasurer
subject to the control of the Board of Directors. The treasurer shall, if
required by the Board of Directors, give a bond to the corporation in such sum
and with such security as shall be approved by the Board of Directors for the
faithful performance of all the duties of the treasurer and for restoration to
the corporation in the event of the treasurer's death, resignation, retirement,
or removal from office, of all books, records, papers, vouchers, money and other
property belonging to the corporation. The expense of such bond shall be borne
by the corporation.
Section 3.09 Assistant Treasurer. The Board of Directors may appoint an
assistant treasurer who shall have such powers and perform such duties as may be
prescribed by the treasurer of the corporation or by the Board of Directors, and
the Board of Directors may require the assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for the
restoration to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other
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property belonging to the corporation. The expense of such bond shall be borne
by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of the corporation shall
be issued in such manner and at such times and upon such conditions as shall be
prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the corporation
and shall be signed by the president or the vice president and also by the
secretary or an assistant secretary. Each certificate shall contain the name of
the record holder, the number, designation, if any, class or series of shares
represented, a statement of summary of any applicable rights, preferences,
privileges, or restrictions thereon, and a statement that the shares are
assessable, if applicable. All certificates shall be consecutively numbered. The
name and address of the shareholder, the number of shares, and the date of issue
shall be entered on the stock transfer books of the corporation.
Section 4.03 Surrender: Lost or Destroyed Certificates. All
certificates surrendered to the corporation, except those representing shares of
treasury stock, shall be canceled and no new certificates shall be issued until
the former certificate for a like number of shares shall have been canceled,
except that in case of a lost, stolen, destroyed or mutilated certificate, a new
one may be issued therefor. However, any shareholder applying for the issuance
of a stock certificate in lieu of one alleged to have been lost, stolen,
destroyed or mutilated shall, prior to the issuance of a replacement, provide
the corporation with his, her or its affidavit of the facts surrounding the
loss, theft, destruction or mutilation and an indemnity bond in an amount and
upon such terms as the treasurer, or the Board of Directors, shall require. In
no case shall the bond be in amount less than twice the current market value of
the stock and it shall indemnify the corporation against any loss, damage, cost
or inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of
Incorporation are amended in any way affecting the statements contained in the
certificates for outstanding shares of capital stock of the corporation or it
becomes desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue a
new certificate therefor conforming to the rights of the holder, the Board of
Directors may order any holders of outstanding certificates for shares to
surrender and exchange the same for new certificates within a reasonable time to
be fixed by the Board of Directors. The order may provide that a holder of any
certificate(s) ordered to be surrendered shall not be entitled to vote, receive
dividends or
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exercise any other rights of shareholders until the holder has complied with the
order provided that such order operates to suspend such rights only after notice
and until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation by the certificate
therefor, accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer on the books of the
corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one or
more transfer agents and registrars of transfer and may require all certificates
for shares of stock to bear the signature of such transfer agent and such
registrar of transfer.
Section 4.07 Stock Transfer Books. The stock transfer books shall be
closed for a period of ten (10) days prior to all meetings of the shareholders
and shall be closed for the payment of dividends as provided in Article V hereof
and during such periods as, from time to time, may be fixed by the Board of
Directors, and, during such periods, no stock shall be transferable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the corporation.
ARTICLE V
DIVIDENDS
Section 5.01 Dividends may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06 of these Bylaws,
prior to the dividend payment for the purpose of determining shareholders
entitled to receive payment of any dividend. The Board of Directors may close
the stock transfer books for such purpose for a period of not more than ten (10)
days prior to the payment date of such dividend.
ARTICLE VI
OFFICES; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
Section 6.01 Principal Office. The principal office of the corporation in
the State of Nevada shall be the Law Offices of Max C. Tanner, 2950 East
Flamingo Road, Suite G, Las
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Vegas, Nevada 89121, and the corporation may have an office in any other state
or territory as the Board of Directors may designate.
Section 6.02 Records. The stock transfer books and a certified copy of
the By-laws, Articles of Incorporation, any amendments thereto, and the minutes
of the proceedings of the shareholders, the Board of Directors, and committees
of the Board of Directors shall be kept at the principal office of the
corporation for the inspection of all who have the right to see the same and for
the transfer of stock. All other books of the corporation shall be kept at such
places as may be prescribed by the Board of Directors.
Section 6.03 Financial Report on Request. Any shareholder or
shareholders holding at least five percent (5%) of the outstanding shares of any
class of stock may make a written request for an income statement of the
corporation for the three (3) month, six (6) month, or nine (9) month period of
the current fiscal year ended more than thirty (30) days prior to the date of
the request and a balance sheet of the corporation as of the end of such period.
In addition, if no annual report for the last fiscal year has been sent to
shareholders, such shareholder or shareholders may make a request for a balance
sheet as of the end of such fiscal year and an income statement and statement of
changes in financial position for such fiscal year. The statement shall be
delivered or mailed to the person making the request within thirty (30) days
thereafter. A copy of the statements shall be kept on file in the principal
office of the corporation for twelve (12) months, and such copies shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to each shareholder. Upon request by any
shareholder, there shall be mailed to the shareholder a copy of the last annual,
semiannual or quarterly income statement which it has prepared and a balance
sheet as of the end of the period. The financial statements referred to in this
Section 6.03 shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
Section 6.04 Right of Inspection.
(a) The accounting books and records and minutes of
proceedings of the shareholders and the Board of Directors and
committees of the Board of Directors shall be open to inspection upon
the written demand of any shareholder or holder of a voting trust
certificate at any reasonable time during usual business hours for a
purpose reasonably related to such holder's interest as a shareholder
or as the holder of such voting trust certificate. This right of
inspection shall extend to the records of the subsidiaries, if any, of
the corporation. Such inspection may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and
make extracts.
(b) Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the corporation
and/or its subsidiary corporations. Such inspection
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may be made in person or by agent or attorney, and the right of
inspection includes the right to copy and make extracts.
Section 6.05 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall
be the calendar year or such other term as may be fixed by resolution of the
Board of Directors.
Section 6.07 Reserves. The Board of Directors may create, by
resolution, out of the earned surplus of the corporation such reserves as the
directors may, from time to time, in their discretion, think proper to provide
for contingencies, or to equalize dividends or to repair or maintain any
property of the corporation, or for such other purpose as the Board of Directors
may deem beneficial to the corporation, and the directors may modify or abolish
any such reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless prohibited
by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be so involved in any threatened, pending or completed action suit
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation, any action, suit or proceeding
brought by or in the right of the corporation to procure a judgment in its favor
(collectively, a "Proceeding") by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other entity or enterprise, against all Expenses and Liabilities actually and
reasonably incurred by him in connection with such Proceeding. The right to
indemnification conferred in this Article shall be presumed to have been relied
upon by the directors, officers, employees and agents of the corporation and
shall be enforceable as a contract right and inure to the benefit of heirs,
executors and administrators of such individuals.
Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada Law. Such agreements or arrangements may provide (i)
that the Expenses of officers and directors incurred in defending a civil or
criminal
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action, suit or proceeding, must be paid by the corporation as they are incurred
and in advance of the final disposition of any such action, suit or proceeding
provided that, if required by Nevada Law at the time of such advance, the
officer or director provides an undertaking to repay such amounts if it is
ultimately determined by a court of competent jurisdiction that such individual
is not entitled to be indemnified against such expenses, (iii) that the
Indemnitee shall be presumed to be entitled to indemnification under this
Article or such agreement or arrangement and the corporation shall have the
burden of proof to overcome that presumption, (iii) for procedures to be
followed by the corporation and the Indemnitee in making any determination of
entitlement to indemnification or for appeals therefrom and (iv) for insurance
or such other Financial Arrangements described in Paragraph 7.02 of this
Article, all as may be deemed appropriate by the Board of Directors at the time
of execution of such agreement or arrangement.
Section 7.03 Insurance and Financial Arrangements. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out of
his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv) the establishment of a
letter of credit, guaranty or surety.
Section 7.04 Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and,
without limitation, means (i) all direct and indirect costs incurred,
paid or accrued, (ii) all attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, food and
lodging expenses while traveling, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service, freight or
other transportation fees and expenses, (iii) all other disbursements
and out-of-pocket expenses, (iv) amounts paid in settlement, to the
extent permitted by Nevada Law, and (v) reasonable compensation for
time spent by the Indemnitee for which he is otherwise not compensated
by the corporation or any third party, actually and reasonably incurred
in connection with either the appearance at or investigation, defense,
settlement or appeal of a Proceeding or establishing or enforcing a
right to indemnification under any agreement or arrangement, this
Article, the Nevada Law or otherwise; provided, however, that
"Expenses" shall not include any judgments or fines or excise taxes or
penalties imposed under the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or other excise taxes or penalties.
Liabilities. "Liabilities" means liabilities of any type whatsoever,
including, but not limited to, judgments or fines, ERISA or other excise
taxes and penalties, and amounts paid in settlement.
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Nevada Law. "Nevada Law" means Chapter 78 of the Nevada Revised
Statutes as amended and in effect from time to time or any successor or
other statutes of Nevada having similar import and effect.
This Article. "This Article" means Paragraphs 7.0l through 7.04 of
these By- Laws or any portion of them.
Power of Stockholders. Paragraphs 7.01 through 7.04, including this
Paragraph, of these By-Laws may be amended by the stockholders only by
vote of the holders of sixty-six and two-thirds percent (66 2/3%) of the
entire number of shares of each class, voting separately, of the
outstanding capital stock of the corporation (even though the right of any
class to vote is otherwise restricted or denied); provided, however, no
amendment or repeal of this Article shall adversely affect any right of
any Indemnitee existing at the time such amendment or repeal becomes
effective.
Power of Directors. Paragraphs 7.01 through 7.04 and this Paragraph
of these ByLaws may be amended or repealed by the Board of Directors only
by vote of eighty percent (80%) of the total number of Directors and the
holders of sixty-six and two-thirds percent (66 2/3) of the entire number
of shares of each class, voting separately, of the- outstanding capital
stock of the corporation (even though the right of any class to vote is
otherwise restricted or denied); provided, however, no amendment or repeal
of this Article shall adversely affect any right of any Indemnitee
existing at the time such amendment or repeal becomes effective.
ARTICLE VIII
BY-LAWS
Section 8.01 Amendment. Amendments and changes of these By-Laws may be
made at any regular or special meeting of the Board of Directors by a vote of
not less than all of the entire Board, or may be made by a vote of, or a consent
in writing signed by the holders of a majority of the issued and outstanding
capital stock.
Section 8.02 Additional By-Laws. Additional by-laws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board of
Directors at which a quorum is present by an affirmative vote of a majority of
the directors present or by the unanimous consent of the Board of Directors in
accordance with Section 2.11 of these By-laws.
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CERTIFICATION
I, the undersigned, being the duly elected secretary of the
Corporation, do hereby certify that the foregoing By-laws were adopted by the
Board of Directors on the 30th day of January, 1997.
/s/ Max C. Tanner
------------------------
Max C. Tanner, Secretary
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EXHIBIT 3.2
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ACTION VENTURI TECHNOLOGY, INC.
(Name of Corporation is changed herein to
"VENTURI TECHNOLOGIES, INC.")
SECTION ONE
ADOPTION OF AMENDED AND RESTATED ARTICLES OF INCORPORATION
Action Venturi Technology, Inc. (the "Corporation"), pursuant to the
provisions of Article 4.07 of the Texas Business Corporation Act, hereby adopts
these Amended and Restated Articles of Incorporation which accurately copy the
Articles of Incorporation and all amendments thereto that are in effect to date
and as further amended by these Amended and Restated Articles of Incorporation
as hereinafter set forth and which contain no other change in any provision
thereof.
SECTION TWO
ARTICLES OF AMENDMENT
The Articles of Incorporation of the Corporation are amended by the
Amended and Restated Articles of Incorporation as follows:
Pursuant to the provisions of Article 4.04 of the Texas
Business Corporation Act, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
(a) The name of the Corporation is Action Venturi Technology,
Inc.
(b) The following amendments to the Articles of Incorporation
were adopted by the shareholders of the Corporation on May 17, 1996.
(1) The amendments alter or change Article One of the
original Articles of Incorporation and the full text of
Article One as amended is as follows:
ARTICLE ONE
THE NAME OF THE CORPORATION IS VENTURI TECHNOLOGIES, INC.
(2) The amendments alter or change Article Three of
the original Articles of Incorporation and the full text of
Article Three as amended is as follows:
ARTICLE THREE
<PAGE> 2
THE PURPOSE OF THE CORPORATION SHALL BE TO CONDUCT ANY OR ALL
LAWFUL BUSINESS FOR WHICH CORPORATIONS MAY BE ORGANIZED UNDER
THE TEXAS BUSINESS CORPORATION ACT AS FROM TIME TO TIME
AUTHORIZED BY ITS BOARD OF DIRECTORS, INCLUDING BUT NOT
LIMITED TO:
(a) PROVIDING CARPET, DRAPERY, UPHOLSTERY AND OTHER
FLOORING AND HARD SURFACE CLEANING SERVICES;
INSTALLING CARPET, TILE AND ALL FLOORING MATERIAL;
CONTRACTING WITH RESIDENTIAL, COMMERCIAL,
MULTI-FAMILY HOUSING AND GENERAL CONTRACTORS AND/OR
SUBCONTRACTORS TO PERFORM ANY AND/OR ALL OF THE
ABOVE.
(b) MANUFACTURING AND SELLING HEATERS FOR USE IN ALL
OF THE ABOVE APPLICATIONS AND ANY OTHER HEATING
APPLICATIONS DEEMED SAFE AND PROFITABLE TO THE
CORPORATION.
(c) MANUFACTURING AND SELLING CHEMICALS AND OTHER
RELATED CLEANING SUPPLIES USED IN THE ABOVE
INDUSTRIES AND ANY AND ALL OTHER INDUSTRIES DEEMED
SAFE AND PROFITABLE TO THE CORPORATION.
(d) ENGAGING IN THE BUSINESS OF PROVIDING JANITORIAL
SERVICES.
(e) ENTERING INTO ANY LAWFUL ARRANGEMENT FOR SHARING
PROFITS, UNION OF INTEREST, RECIPROCAL ASSOCIATION OR
COOPERATIVE ASSOCIATION WITH ANY CORPORATION,
ASSOCIATION, PARTNERSHIP, INDIVIDUAL OR OTHER LEGAL
ENTITY FOR THE CARRYING ON OF ANY BUSINESS AND
ENTERING INTO ANY GENERAL OR LIMITED PARTNERSHIP FOR
THE CARRYING ON OF ANY BUSINESS.
IN PURSUIT OF THIS PURPOSE, THE CORPORATION WILL HAVE
ALL THE POWERS GRANTED TO IT BY LAW.
(3) The amendments alter or change Article Four of the
original Articles of Incorporation and the full text of Article Four as
amended is as follows:
ARTICLE FOUR
THE AGGREGATE NUMBER OF SHARES WHICH THE CORPORATION
SHALL HAVE AUTHORITY TO ISSUE IS 20,000,000 SHARES OF
NO PAR VALUE COMMON STOCK AND 5,000,000 SHARES OF NO
PAR VALUE PREFERRED STOCK. ALL VOTING RIGHTS OF THE
CORPORATION SHALL BE EXERCISED BY THE HOLDERS OF THE
COMMON STOCK IN THE MANNER PRESCRIBED BY LAW, WITH
EACH SHARE OF VOTING COMMON STOCK BEING ENTITLED TO
ONE VOTE. ALL SHARES OF COMMON STOCK SHALL BE OF THE
SAME SERIES AND SHALL HAVE EQUAL RIGHTS. FULLY PAID
STOCK SHALL NOT BE LIABLE TO ANY CALL AND IS
NON-ASSESSABLE. HOLDERS OF SHARES OF COMMON
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<PAGE> 3
STOCK SHALL NOT HAVE PREEMPTIVE RIGHTS UNLESS GRANTED
BY RESOLUTION OF THE BOARD OF DIRECTORS. THE BOARD OF
DIRECTORS SHALL HAVE AUTHORITY TO ESTABLISH, BY
RESOLUTION, SERIES OF THE AUTHORIZED PREFERRED STOCK
BY FIXING AND DETERMINING THE DESIGNATIONS,
PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS,
INCLUDING VOTING RIGHTS, FOR THE SHARES TO BE
INCLUDED IN SUCH SERIES.
(4) The amendments alter or change Article Six of the original
Articles of Incorporation and the full text of Article Six as amended
is as follows:
ARTICLE SIX
THE ADDRESS OF THE REGISTERED OFFICE OF THE
CORPORATION IS 3629 CONFLANS, IRVING, TEXAS 75061 AND
THE NAME OF ITS REGISTERED AGENT AT SUCH ADDRESS IS
BILL THOMAS.
Prior to this amendment, the registered office of the
Corporation was 112 Bedford Rd., #100, Bedford, Texas 76022,
and the name of the registered agent at such office was
Gaylord Karren.
(5) The amendments delete all of Article Seven of the original
Articles of Incorporation. The deleted Article Seven read as follows:
ARTICLE SEVEN
SUBJECT TO THE CORPORATION REMAINING A CLOSE
CORPORATION, THE BUSINESS AND AFFAIRS OF THE
CORPORATION SHALL BE MANAGED BY THE SHAREHOLDERS OF
THE CORPORATION. THE NAME AND ADDRESS OF THE PERSON
WHO HAS SUBSCRIBED FOR SHARES TO BE ISSUED BY THE
CLOSE CORPORATION AND WHO WILL PERFORM THE FUNCTIONS
OF THE INITIAL BOARD OF DIRECTORS IS: GAYLORD KARREN
112 BEDFORD RD., #100, BEDFORD, TEXAS 76022.
(6) The amendments delete all of Article Eight of the original
Articles of Incorporation. The deleted Article Eight read as follows:
ARTICLE EIGHT
THE NAME AND ADDRESS OF THE INCORPORATOR IS GAYLORD
KARREN, 112 BEDFORD RD., #100, BEDFORD, TEXAS 76022.
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<PAGE> 4
THE INCORPORATORS INCLUDE ALL THE INITIAL SUBSCRIBERS
TO THE CORPORATION'S SHARES AND SECURITIES EVIDENCING
THE RIGHT TO ACQUIRE ITS SHARES.
(7) The amendments delete all of Article Nine of the original
Articles of Incorporation. The deleted Article Nine read as follows:
ARTICLE NINE
1. THIS CORPORATION SHALL BE A CLOSE CORPORATION AS
DEFINED BY THE TEXAS BUSINESS CORPORATION ACT.
2. NO SHARES AND NO SECURITIES EVIDENCING THE RIGHT TO
ACQUIRE SHARES SHALL BE ISSUED BY MEANS OF PUBLIC
OFFERING, SOLICITATION OR ADVERTISEMENT WITHOUT A
MAJORITY VOTE OF ITS SHAREHOLDERS.
3. ALL ITS SHARES AND SECURITIES SHALL BE SUBJECT TO
RESTRICTIONS ON TRANSFER AS PERMITTED BY ARTICLE 2.22 OF
THE TEXAS BUSINESS CORPORATION ACT.
4. ONLY EMPLOYEES OF THIS CORPORATION MAY ACQUIRE ITS
SHARES OTHER THAN THOSE TO WHOM BY AUTHORIZATION AND
APPROVAL PER ITEMS #2 & 3 ABOVE HAVE BEEN ISSUED SHARES
BY SOLICITATION FOR PRIVATE OR PUBLIC OFFERING.
5. ALL ISSUED SHARES, EXCLUDING TREASURY SHARES, AND ALL
ISSUED SECURITIES EVIDENCING THE RIGHT TO ACQUIRE SHARES
OF THE CORPORATION SHALL BE HELD OF RECORD BY NOT MORE
THAN 35 PERSONS IN THE AGGREGATE.
6. EACH HOLDER OF COMMON STOCK OF THIS CORPORATION SHALL
HAVE THE FIRST RIGHT, SUBJECT TO REASONABLE ADJUSTMENTS
TO AVOID THE ISSUE OF FRACTIONAL SHARES, TO PURCHASE
SHARES OF COMMON STOCK OF THIS CORPORATION THAT MAY
HEREAFTER FROM TIME TO TIME BE ISSUED WHETHER OR NOT
PRESENTLY AUTHORIZED, INCLUDING TREASURY SHARES OF THE
CORPORATION IN THE RATIO THAT THE NUMBER OF SHARES OF
COMMON STOCK HE HOLDS AT THE TIME OF THE ISSUE BEARS TO
THE TOTAL NUMBER OF SHARES OF COMMON STOCK WHO DOES NOT
EXERCISE IT AND PAY FOR THE STOCK PREEMPTED WITHIN 30
DAYS OF RECEIPT OF A NOTICE IN WRITING FROM THE
CORPORATION INVITING HIM OR HER TO EXERCISE THE RIGHT.
(8) The amendments delete all of Article Ten of the original
Articles of Incorporation. The deleted Article Ten read as follows:
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<PAGE> 5
ARTICLE TEN
THE CORPORATION WILL NOT, EXCEPT UPON RECEIVING THE
AFFIRMATIVE VOTE OR WRITTEN CONSENT OF HOLDERS OF AT
LEAST TWO THIRDS OF ITS COMMON SHARES:
a. AMEND THE ARTICLES OF INCORPORATION SO AS
TO (I) CREATE, (II) INCREASE OR DECREASE THE
AUTHORIZED NUMBER OF, OR (III) CHANGE THE
DESIGNATIONS, PREFERENCES, QUALIFICATIONS,
LIMITATIONS, RESTRICTIONS OR SPECIAL OR
RELATIVE RIGHTS OF THE SHARES.
b. MERGE OR CONSOLIDATE WITH OR INTO ANY
OTHER CORPORATION, SELL, LEASE OR CONVEY ALL
OR SUBSTANTIALLY ALL OF ITS PROPERTY AND
ASSETS, OR VOLUNTARILY DISSOLVE, LIQUIDATE
OR WIND UP ITS AFFAIRS.
c. AMEND ITS ARTICLES OF INCORPORATION OR
ITS BYLAWS ADOPTED BY ITS BOARD AT THE
MEETING OF THE BOARD OF DIRECTORS.
d. ISSUE OR SELL SHARES INCLUDING THE
AUTHORIZED, BUT UNISSUED OR TREASURY SHARES
TO ANY ONE WHO IS NOT AN EMPLOYEE OF THE
CORPORATION.
(9) The amendments add a new Article Seven to the original
Articles of Incorporation and the full text of the new Article Seven is
as follows:
ARTICLE SEVEN
THE NUMBER OF DIRECTORS SHALL BE FIXED BY THE BYLAWS.
THE NUMBER OF DIRECTORS CONSTITUTING THE BOARD OF
DIRECTORS OF THE CORPORATION AT THE TIME THESE
AMENDED AND RESTATED ARTICLES OF INCORPORATION ARE
ADOPTED SHALL BE THREE AND THE NAMES AND ADDRESSES OF
THE PERSONS WHO ARE TO SERVE AS DIRECTORS UNTIL THE
NEXT REGULAR ANNUAL MEETING OF THE SHAREHOLDERS OR
UNTIL THEIR SUCCESSORS ARE ELECTED AND SHALL QUALIFY
ARE:
NAME ADDRESS
GAYLORD KARREN 3629 CONFLANS
IRVING, TEXAS 75061
5
<PAGE> 6
JOHN HOPKINS 3629 CONFLANS
IRVING, TEXAS 75061
JAMES A. FRAME 3629 CONFLANS
IRVING, TEXAS 75061
(10) The amendments add a new Article Eight to the original
Articles of Incorporation and the full text of the new Article Eight is
as follows:
ARTICLE EIGHT
TO THE FULLEST EXTENT PERMITTED BY THE TEXAS BUSINESS
CORPORATION ACT OR ANY OTHER APPLICABLE LAW AS NOW IN
EFFECT OR AS IT MAY HEREAFTER BE AMENDED, A DIRECTOR
OF THIS CORPORATION SHALL NOT BE PERSONALLY LIABLE TO
THE CORPORATION OR ITS SHAREHOLDERS FOR MONETARY
DAMAGES FOR ANY ACTION TAKEN OR ANY FAILURE TO TAKE
ANY ACTION, AS A DIRECTOR.
NEITHER ANY AMENDMENT NOR REPEAL OF THIS ARTICLE
VIII, NOR THE ADOPTION OF ANY PROVISION IN THESE
ARTICLES OF INCORPORATION INCONSISTENT WITH THIS
ARTICLE VIII, SHALL ELIMINATE OR REDUCE THE EFFECT OF
THIS ARTICLE VIII IN RESPECT OF ANY MATTER OCCURRING,
OR ANY CAUSE OF ACTION, SUIT OR CLAIM THAT, BUT FOR
THIS ARTICLE VIII, WOULD ACCRUE OR ARISE, PRIOR TO
SUCH AMENDMENT, REPEAL OR ADOPTION OF AN INCONSISTENT
PROVISION.
(11) The amendments add a new Article Nine to the original
Articles of Incorporation and the full text of the new Article Nine is
as follows:
ARTICLE NINE
ANY ACTION WHICH MAY BE TAKEN BY THE SHAREHOLDERS AT
A MEETING MAY BE TAKEN WITHOUT A MEETING, WITHOUT
PRIOR NOTICE, AND WITHOUT A VOTE, IF THE HOLDERS OF A
SIMPLE MAJORITY, OR SUCH LARGER MAJORITY AS IS
REQUIRED BY LAW OR THESE ARTICLES OF INCORPORATION,
OF THE TOTAL OUTSTANDING SHARES OF COMMON STOCK SIGN
A WRITTEN CONSENT WHICH SETS FORTH THE ACTION.
6
<PAGE> 7
SECTION THREE
SHAREHOLDER ADOPTION OF
AMENDMENTS
Each such amendment made by these Amended and Restated Articles of
Incorporation has been effected in conformity with the provisions of the Texas
Business Corporation Act and such Amended and Restated Articles of Incorporation
and each such amendment made by the Amended and Restated Articles of
Incorporation were duly adopted by the shareholders of the corporation on May
17, 1996.
SECTION FOUR
SHAREHOLDER VOTE/CONSENT
The number of shares outstanding was 526,738, and the number of shares
entitled to vote on the Amended and Restated Articles of Incorporation as so
amended was 526,738. Article Ten of the original Articles of Incorporation
provides that the Articles may be amended by the written consent of the holders
of at least two-thirds of the outstanding shares of Common Stock. The holders of
360,070 shares of such Common Stock signed a written consent to the adoption of
these Amended and Restated Articles of Incorporation. This represents 68.36% of
the shares entitled to vote, in excess of the two-thirds majority requirement.
Accordingly, these Amended and Restated Articles of Incorporation and the
amendments to the Articles of Incorporation effected hereby were adopted by the
Shareholders of the Corporation pursuant to Article 9.10 of the Texas Business
Corporation Act.
SECTION FIVE
ORIGINAL ARTICLES AND ALL
AMENDMENTS SUPERSEDED
The original Articles of Incorporation and all amendments and
supplements thereto are hereby superseded by the following Amended and Restated
Articles of Amendment which accurately copy the entire text thereof and as
amended as set forth above:
SECTION SIX
AMENDED AND RESTATED ARTICLES OF INCORPORATION
Pursuant to the recommendation of its Board of Directors and approval
of its shareholders, the Corporation adopts the following Amended and Restated
Articles of Incorporation in conformity with the Texas Business Corporation Act:
7
<PAGE> 8
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
VENTURI TECHNOLOGIES, INC.
ARTICLE I
NAME OF CORPORATION
The name of the Corporation is VENTURI TECHNOLOGIES, INC.
ARTICLE II
DURATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES
The purpose of the Corporation shall be to conduct any or all lawful
business for which corporations may be organized under the Texas Business
Corporation Act as from time to time authorized by its Board of Directors,
including but not limited to:
(a) Providing carpet, drapery, upholstery and other flooring and
hard surface cleaning services; installing carpet, tile and all flooring
material; contracting with residential, commercial, multi-family housing
and general contractors and/or subcontractors to perform any and/or all of
the above.
(b) Manufacturing and selling heaters for use in all of the above
applications and any other heating applications deemed safe and profitable
to the corporation.
(c) Manufacturing and selling chemicals and other related cleaning
supplies used in the above industries and any and all other industries
deemed safe and profitable to the corporation.
(d) Engaging in the business of providing janitorial services.
(e) Entering into any lawful arrangement for sharing profits, union
of interest, reciprocal association or cooperative association with any
corporation, association, partnership, individual or other legal entity
for the carrying on of any business and entering into any general or
limited partnership for the carrying on of any business.
In pursuit of this purpose, the Corporation will have all the powers granted to
it by law.
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<PAGE> 9
ARTICLE IV
SHARES
The aggregate number of shares which the Corporation shall have
authority to issue is 20,000,000 shares of no par value common stock and
5,000,000 shares of no par value preferred stock. All voting rights of the
Corporation shall be exercised by the holders of the common stock in the manner
prescribed by law, with each share of voting common stock being entitled to one
vote. All shares of common stock shall be of the same series and shall have
equal rights. Fully paid stock shall not be liable to any call and is
non-assessable. Holders of shares of common stock shall not have preemptive
rights unless granted by resolution of the Board of Directors. The Board of
Directors shall have authority to establish, by resolution, series of the
authorized preferred stock by fixing and determining the designations,
preferences, limitations, and relative rights, including voting rights, for the
shares to be included in such series.
ARTICLE V
The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of one thousand dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is 3629
Conflans, Irving, Texas 75061 and the name of its registered agent at such
address is Bill Thomas.
ARTICLE VII
DIRECTORS
The number of directors shall be fixed by the bylaws. The number of
directors constituting the Board of Directors of the Corporation at the time
these Amended and Restated Articles of Incorporation are adopted shall be three
and the names and addresses of the persons who are to serve as directors until
the next regular annual meeting of the shareholders or until their successors
are elected and shall qualify are:
NAME ADDRESS
GAYLORD KARREN 3629 CONFLANS
IRVING, TEXAS 75061
JOHN HOPKINS 3629 CONFLANS
IRVING, TEXAS 75061
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<PAGE> 10
JAMES A. FRAME 3629 CONFLANS
IRVING, TEXAS 75061
ARTICLE VIII
INDEMNIFICATION
To the fullest extent permitted by the Texas Business Corporation Act
or any other applicable law as now in effect or as it may hereafter be amended,
a director of this Corporation shall not be personally liable to the Corporation
or its shareholders for monetary damages for any action taken or any failure to
take any action, as a director.
Neither any amendment nor repeal of this Article VIII, nor the adoption
of any provision in these Articles of Incorporation inconsistent with this
Article VIII, shall eliminate or reduce the effect of this Article VIII in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this Article VIII, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE IX
ACTION WITHOUT MEETING
Any action which may be taken by the shareholders at a meeting may be
taken without a meeting, without prior notice, and without a vote, if the
holders of a simple majority, or such larger majority as is required by law or
these Articles of Incorporation, of the total outstanding shares of common stock
sign a written consent which sets forth the action.
The undersigned being the individual named in Article VI, above, as the
registered agent of the Corporation, hereby consents to such appointment.
REGISTERED AGENT
/s/ Bill Thomas
---------------------------
BILL THOMAS
10
<PAGE> 11
The undersigned officer of the Corporation executed these Restated
Articles of Incorporation, certifying that the facts herein stated are true this
20th of May, 1996.
THE CORPORATION:
Venturi Technologies, Inc.
/s/ Gaylord Karren
--------------------------
By: GAYLORD KARREN
Its: President
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On this 20th day of May, 1996, personally appeared before me GAYLORD
KARREN, personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is signed on the preceding document, and
acknowledged to me that he signed it voluntarily for its stated purpose.
/s/ Dixie Barman
-------------------
NOTARY PUBLIC
[SEAL]
11
<PAGE> 1
Exhibit 3.3
ARTICLES OF INCORPORATION
OF
ACTION VENTURI TECHNOLOGY, INC.
ARTICLE ONE
The name of the corporation is ACTION VENTURI TECHNOLOGY, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purposes for which the corporation is organized are:
1. To provide carpet, drapery, upholstery and other flooring and
hard surface cleaning. To install carpet, tile and all
flooring material. To contract with residential, commercial,
multi-housing and general contractors and/or subcontractors to
perform any and all of the above.
2. In general to do such other things as are incidental to the
foregoing or necessary or desirable in order to accomplish the
foregoing. To provide at any time an expansion of the services
described in #1 above relating to duct cleaning, fire
restoration, wall and ceilings, or any other related cleaning
services associated with these.
ARTICLE FOUR
The aggregate number of shares which the corporation has authority to
issue is 1,000,000 without par value and shall be issued as Rule 1244 stock of
the Internal Revenue Code.
ARTICLE FIVE
The corporation will not commence business until it has received for
the issuance of its shares consideration of the value of one thousand dollars
($1,000), consisting of money, labor done, or property actually received.
ARTICLE SIX
The address of its registered office is ACTION VENTURI TECHNOLOGY, INC., 112
Bedford Rd., #100, Bedford, Texas 76022.
<PAGE> 2
The name of its registered agent at such office is Gaylord Karren.
ARTICLE SEVEN
Subject to the corporation remaining a close corporation, the business
and affairs of the corporation shall be managed by the shareholders of the
corporation. The name and address of the person who has subscribed for shares to
be issued by the close corporation and who will perform the functions of the
initial board of directors is: Gaylord Karren 112 Bedford Rd., #100, Bedford,
Texas 76022.
ARTICLE EIGHT
The name and address of the incorporator is Gaylord Karren, 112 Bedford
Rd., #100, Bedford, Texas 76022.
The incorporators include all the initial subscribers to the
corporation's shares and securities evidencing the right to acquire its shares.
ARTICLE NINE
1. This corporation shall be a close corporation as defined by the Texas
Business Corporation Act.
2. No shares and no securities evidencing the right to acquire shares
shall be issued by means of public offering, solicitation or
advertisement without a majority vote of its shareholders.
3. All its shares and securities shall be subject to restrictions on
transfer as permitted by Article 2.22 of the Texas Business Corporation
Act.
4. Only employees of this corporation may acquire its shares other than
those to whom by authorization and approval per items #2 & 3 above have
been issued shares by solicitation for private or public offering.
5. All issued shares, excluding treasury shares, and all issued securities
evidencing the right to acquire shares of the corporation shall be held
of record by not more than 35 persons in the aggregate.
6. Each holder of common stock of this corporation shall have the first
right, subject to reasonable adjustments to avoid
2
<PAGE> 3
the issue of fractional hares, to purchase shares of common stock of
this corporation that may hereafter from time to time be issued whether
or not presently authorized, including treasury shares of the
corporation in the ratio that the number of shares of common stock he
holds at the time of the issue bears to the total number of shares of
common stock who does not exercise it and pay for the stock preempted
within 30 days of receipt of a notice in writing from the corporation
inviting him or her to exercise the right.
ARTICLE TEN
The corporation will not, except upon receiving the affirmative vote or
written consent of holders of at least two thirds of its common shares:
a. Amend the Articles of Incorporation so as to (i) create, (ii)
increase of decrease the authorized number of, or (iii) change
the designations, preferences, qualifications, limitations,
restrictions, or special or relative rights of the shares.
b. Merge or consolidate with or into any other corporation, sell,
lease or convey all or substantially all of its property and
assets, or voluntarily dissolve, liquidate or wind up its
affairs.
c. Amend its Articles of Incorporation or its bylaws adopted by
its board at the meeting of the board of directors.
d. Issue or sell shares including the authorized, but unissued or
treasury shares to any one who is not an employee of the
corporation.
/s/ Gaylord Karren
-------------------------------
GAYLORD KARREN
3
<PAGE> 4
The State of Texas *
*
County of _________ *
I, the undersigned, a Notary Public, do hereby certify that on Gaylord
Karren, 1991, personally appeared before me, GAYLORD KARREN known to me to be
the person whose name is subscribed to the foregoing document and, being by me
first duly sworn, declared and that the statements therein contained are true
and correct.
/s/ Sandra Perez
-------------------------------
Notary Public in and for
Dallas County, Texas
My commission expires: 7-27-96
4
<PAGE> 1
Exhibit 3.4
ACTION VENTURI TECHNOLOGY, INC.
BY-LAWS
ARTICLE I
OFFICES
1.1 The principal offices of the corporation shall be located in
Dallas, Texas.
1.2 The corporation may also have offices at such other places both
within and without the State of Texas as the board of directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
MEETING OF SHAREHOLDERS
2.1 Meetings of shareholders for any purpose may be held at such time
and place within or without the State of Texas as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
2.2 The annual meeting of shareholders, at which they shall elect a
board of directors and transact such other business as may properly be brought
before the meeting, shall be held annually at such date and time as shall be
designated from time to time by the board of directors and stated in the notice
of meeting.
2.3 Special meetings of the shareholders for any purpose or purposes
may be called by the president and shall be called by the president or secretary
at the request in writing of a majority of the board of directors, or at the
request in writing of shareholders owning one-tenth of all the shares entitled
to
<PAGE> 2
vote at the meetings. A request for a special meeting shall state the purpose or
purposes of the proposed meeting, and business transacted at any special meeting
of shareholders shall be limited to the purposes stated in the notice.
2.4 Written notice stating the place, day and hour of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten nor more than fifty days before
the date of the meeting, either personally or by mail, by or at the direction of
the president, the secretary, or the officer or persons calling the meeting, to
each shareholder of record entitled to vote at such meeting.
2.5 The holders of a majority of the shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, a quorum shall not be present or represented at any
meeting of the shareholders, the shareholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting, provided a
quorum shall be present or represented thereat, any business may be transacted
which might have been
-2-
<PAGE> 3
transacted if the meeting had been held in accordance with the
original notice thereof.
2.6 Except as provided below, when a quorum is present at a meeting,
the vote of the holders of a majority of the shares having voting power, present
in person or represented by proxy, shall decide any question brought before such
meeting, unless the question is one on which, by express provision of statue,
the Articles of Incorporation, or these bylaws, a higher vote is required, in
which case the express provision shall govern. Notwithstanding the foregoing,
any question brought before a meeting concerning the merger, consolidation or
sale of substantially all of the assets of the corporation not in the ordinary
course of business, shall be affirmed by a vote of not less than ninety percent
(90%) of the total number of shares of stock outstanding and entitled to vote.
2.7 Each outstanding share having voting power shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders. A
shareholder may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact.
2.8 Any action required or which may be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all the shareholders entitled to
vote with respect to the subject matter thereof.
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<PAGE> 4
ARTICLE III
DIRECTORS
3.1 The number of directors which shall constitute the whole board
shall be not less than three nor more than twelve as determined by the
shareholders, none of whom need be residents of the State of Texas or
shareholders of the corporation. The directors shall be elected at the annual
meeting of the shareholders, and each director elected shall serve until his or
her successor shall have been elected and qualified.
3.2 Any vacancy occurring in the board of directors may be filled by a
majority of the remaining directors, if any, though less than a quorum of the
board of directors. If a vacancy occurs in the board of directors and no other
directors exist to elect someone to fill such vacancy, such vacancy shall be
filled by election at a special meeting of shareholders. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office.
3.3 The number of directors may be increased or decreased from time to
time by amendment to these by-laws but no decrease shall have the effect of
shortening the term of any incumbent director. Any directorship to be filled by
reason of an increase in the number of directors shall be filled by election at
an annual or special meeting of shareholders.
3.4 Any director may be removed either for or without cause at any
special meeting of shareholders duly called and held for such purpose.
-4-
<PAGE> 5
MEETINGS OF THE BOARD OF DIRECTORS
3.5 Meetings of the board of directors, regular or special, may be held
either within or without the State of Texas.
3.6 The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the shareholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event that the shareholders fail to fix the time and
place of such first meeting, it shall be held without notice immediately
following the annual meeting of shareholders, and at the same place, unless by
the unanimous consent of the directors then elected and serving such time or
place shall be changed.
3.7 Regular meetings of the board of directors may be held upon such
notice, or without notice, and at such time and at such place as shall from time
to time be determined by the board.
3.8 Special meetings of the board of directors may be called by the
chairman of the board of directors or the president and shall be called by the
secretary on the written request of two directors. Notice of each special
meeting of the board of directors shall be given to each director at least two
days before the date of the meeting.
3.9. Attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, except where a director attends for the express
purpose of objecting to the
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transaction of any business on the ground that the meeting is not lawfully
called or convened. Except as may be otherwise provided by law or by the
articles of incorporation or by the by-laws, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
3.10 At all meetings of the board of directors a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, unless otherwise specifically
provided by law, the articles of incorporation or the by-laws. If a quorum shall
not be present at any meeting of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
3.11 The board of directors, by resolution passed by a majority of the
full board, may from time to time designate a member or members of the board to
constitute committees, including an executive committee, which shall in each
case consist of one or more directors and shall have and may exercise such
powers, as the board may determine and specify in the respective resolutions
appointing them. A majority of all the members of any such committee may
determine its action and fix the time and place of its meetings, unless the
board of directors shall otherwise provide. The board of directors shall have
power
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at any time to change the number, subject as aforesaid, and members of any such
committee, to fill vacancies and to discharge any such committee.
3.12 Any action required or permitted to be taken at a meeting of the
board of directors or any committee may be taken without a meeting if a consent
in writing, setting forth the action so taken, is signed by all the members of
the board of directors or committee, as the case may be.
3.13 By resolution of the board of directors, the directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
NOTICES
4.1 Any notice to directors or shareholders shall be in writing and
shall be delivered personally or mailed to the directors or shareholders at
their respective addresses appearing on the books of the corporation. Notice by
mail shall be deemed to be given at the time when the same shall be deposited in
the United States mail, postage prepaid. Notice to directors may also be given
by telegram, or by telephone, provided that the Secretary of the Company
attaches a certificate to the minutes of
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the meeting certifying the manner and date that such notice was given to each
director.
4.2 Whenever any notice is required to be given under the provisions of
the statutes or of the articles of incorporation or by these by-laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE V
OFFICERS
5.1 The officers of the corporation shall be elected by the board of
directors and shall consist of a president, a vice president, a secretary and a
treasurer. The board of directors may also elect a chairman of the board, an
assistant president, additional vice presidents, and one or more assistant
secretaries and assistant treasurers. Two or more offices may be held by the
same person.
5.2 The board of directors shall elect a president, one or more vice
presidents, a secretary and a treasurer, none of whom need be a member of the
board. The board of directors shall have the power to enter into contracts for
the employment and compensation of officers for such terms as the board deems
advisable.
5.3 The board of directors may appoint such other officers and
assistant officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall have such
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authority and exercise such powers and perform such duties as shall be
determined from time to time by the board by resolution not inconsistent with
these by-laws.
5.4 The salaries of all officers and agents of the corporation shall be
fixed by the board of directors.
5.5 The officers of the corporation shall hold office until their
successors are elected or appointed and qualify, or until their death or until
their resignation or removal from office. Any officer elected or appointed by
the board of directors may be removed at any time by the board, but such
removal, shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
board of directors.
THE CHAIRMAN OF THE BOARD
5.6 The chairman of the board shall be the CEO and shall preside at all
meetings of the board of directors and shall have such other powers and duties
as may from time to time be prescribed by the board of directors, upon written
directions given to him pursuant to resolutions duly adopted by the board of
directors.
THE PRESIDENT
5.7 The president shall be the chief operating officer of the
corporation, shall have general and active management of the business of the
corporation and shall see that all orders and
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resolutions of the board of directors are carried into effect.
He shall preside at all meetings of the shareholders.
THE VICE PRESIDENT
5.8 The vice presidents in the order of their seniority, unless
otherwise determined by the board of directors, shall, in the absence or
disability of the president, perform the duties and have the authority and
exercise the powers of the president. They shall perform such other duties and
have such other authority and powers as the board of directors may from time to
time prescribe or as the president may from time delegate.
THE SECRETARY AND ASSISTANT SECRETARIES
5.9 The secretary shall attend all meetings of the board of directors
and all meetings of shareholders and record all of the proceedings of the
meetings of the board of directors and of the shareholders in a minute book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the board of directors,
shall affix the same to any instrument requiring it and, when so affixed, it
shall be attested by his signature or by the signature of an assistant secretary
or of the treasurer.
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5.10 The assistant secretaries in the order of their seniority, unless
otherwise determined by the board of directors, shall, in the absence or
disability of the secretary, perform the duties and exercise the powers of the
secretary. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe or as the president may
from time to time delegate.
THE TREASURER AND ASSISTANT TREASURERS
5.11 The treasurer shall have custody of the corporate funds and
securities and shall keep full and accurate accounts and records of receipts,
disbursements and other transactions in books belonging to the corporation, and
shall deposit all moneys and other available effects in the name and to the
credit of the corporation in such depositories as may be designated by the board
of directors.
5.12 The treasurer shall disburse the funds of the corporation as may
be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render the president and the board of directors, at its
regular meetings, or when the president or board of directors so requires, an
account of all his transactions as treasurer and of the financial condition of
the corporation.
5.13 If required by the board of directors, the treasurer shall give
the corporation a bond of such type, character and amount as the board of
directors may require.
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5.14 The assistant treasurers in the order of their seniority, unless
otherwise determined by the board of directors, shall, in the absence or
disability of the treasurer, perform the duties and exercise the powers of the
treasurer. They shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe or the president may from
time to time delegate.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
6.1 The shares of the corporation shall be represented by certificates
signed by the president or a vice president and the secretary or an assistant
secretary of the corporation, and may be sealed with the seal of the corporation
or a facsimile thereof.
6.2 The signatures of the president or vice president and the secretary
or assistant secretary upon a certificate may be facsimiles if the certificate
is countersigned by a transfer agent, or registered by a registrar, other than
the corporation itself or an employee of the corporation. In case any officer
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
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LOST CERTIFICATES
6.3 The board of directors may direct a new certificate to be issued in
place of any certificate theretofore issued by the corporation alleged to have
been lost or destroyed. When authorizing such issue of a new certificate, the
board of directors, in its discretion and as a condition precedent to the
issuance thereof, may prescribe such terms and conditions as it deems expedient
and may require such indemnities as it deems adequate to protect the corporation
from any claim that may be made against it with respect to any such certificate
alleged to have been lost or destroyed.
6.4 Upon surrender to the corporation or the transfer agent of the
corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto and the old
certificate canceled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
6.5 For the purpose of determining shareholders entitled to notice of
or to vote at any meeting of shareholders, or any adjournment thereof, or
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the board of directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer
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books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
stock transfer books, the board of directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than fifty days and, in case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall be applied to any adjournment thereof
except where the determination has been made through the closing of the stock
transfer books and the stated period of closing has expired.
REGISTERED SHAREHOLDERS
6.6 The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner
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of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Texas.
LIST OF SHAREHOLDERS
6.7 The officer or agent having charge of the transfer books for shares
shall make, at least ten days before each meeting of shareholders, a complete
list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of ten days prior to such meeting, shall be kept
on file at the registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share ledger or transfer book, or a duplicate thereof,
shall be prima facie evidence as to who are the shareholders entitled to examine
such list or share ledger or transfer book or to vote at any meeting of the
shareholders.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
7.1 Subject to the provisions of the articles of incorporation relating
thereto, if any, dividends may be declared by the board of directors, in its
discretion, at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property or in the corporation's own shares, subject to any
provisions of the articles of incorporation.
7.2 Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund for meeting contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
7.3 All checks or demands for money and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
board of directors may from time to time designate.
FISCAL YEAR
7.4 The fiscal year of the corporation shall be fixed by resolution of
the board of directors.
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SEAL
7.5 The corporate seal shall be in such form as may be prescribed by
the board of directors. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
BOOKS AND RECORDS
7.6 The corporation shall keep correct and complete books and records
of account and shall keep minutes of the proceedings of its shareholders and
board of directors, and shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a record of
its shareholders, giving the names and addresses of all shareholders and the
number and class of the shares held by each.
ARTICLE VIII
AMENDMENTS
8.1 (a) Except as provided in (c) below, these bylaws may be altered,
amended, or repealed at any meeting of the board of directors at which a quorum
is present, by the affirmative vote of a majority of the directors present, at
such meeting, provided notice of the proposed alteration, amendment, or appeal
is contained in the notice of the meeting, if any.
(b) These bylaws may also be altered, amended, or repealed at
any meeting of the shareholders at which all shareholders are present or
represented, by the affirmative vote of all the holders of all the shares
outstanding and entitled to vote thereat, provided notice of the proposed
alteration,
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amendment, or repeal is contained in the notice of the meeting,
if any.
(c) Notwithstanding the foregoing, no alteration, amendment,
or repeal may be made of Section 2.6 of these bylaws except upon approval of not
less than ninety percent (90%) of all shares outstanding and entitled to vote,
upon notice of the proposed alterations, amendment, or repeal being contained in
the notice of the meeting, if any.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
9.1 The corporation shall indemnify any director or officer or former
director or officer of the corporation, or any person who may have served at its
request as a director or officer or former director or officer of another
corporation in which it owns shares of capital stock or of which it is a
creditor, against expenses actually and necessarily incurred by him in
connection with the defense of any action, suit, or proceeding, whether civil or
criminal, in which he is made a party by reason of being or having been such
director or officer, except in relation to matters as to which he shall be
adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in performance of duty. The corporation shall also reimburse any such
director or officer or former director or officer or any such person serving or
formerly serving in the capacities set forth in the first sentence above at the
request of the corporation for the reasonable cost of settlement of any
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such action, suit or proceeding, if it shall be found by a majority of the
directors not involved in the matter in controversy, whether or not a quorum,
that it was in the best interests of the corporation that such settlement be
made, and that such director or officer or former director or officer or such
person was not guilty of negligence or misconduct in performance of duty. Such
indemnification shall not be deemed exclusive of any other rights to which such
director or officer or former director or officer or such person may be
entitled, under any by-law, agreement, insurance policy or vote of shareholders,
or otherwise.
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<PAGE> 1
Exhibit 3.5
ARTICLES OF INCORPORATION
OF
T-CO MANUFACTURING, INC.
ARTICLE I
NAME OF CORPORATION
The name of the Corporation is T-Co Manufacturing, Inc.
ARTICLE II
DURATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES
The purpose of the Corporation shall be to conduct any or all lawful
business for which corporations may be organized under the State of Utah as from
time to time authorized by its Board of Directors, including but not limited to:
a) Designing, manufacturing and assembling of equipment for the carpet
cleaning industry; contracting with general and sub contractors for the purpose
of successfully completing the production of said equipment.
b) Manufacturing and marketing water heaters for the carpet cleaning
industry and/or for any other industry requiring hot water as deemed appropriate
and by the Board of Directors.
c) Manufacturing and marketing of water conditioning equipment for the
carpet cleaning industry and/or any other industry or market deemed appropriate
by the Board of Directors.
e) Entering into any lawful arrangement for sharing profits, union of
interest, reciprocal association or cooperative association with any
corporation, association,
1
<PAGE> 2
partnership, individual or other legal entity for the carrying on of any
business and entering into any general or limited partnership for the carrying
on of any business.
In pursuit of this purpose, the Corporation will have all the powers granted to
it by law.
ARTICLE IV
SHARES
The aggregate number of shares which the Corporation shall have
authorized to issue is 5,000,000 shares of no par value common stock and
1,000,000 shares of no par value preferred stock. All voting rights of the
Corporation shall be exercised by the holders of the common stock in the manner
prescribed by law, with each share of voting common stock being entitled to one
vote. All shares of common stock shall be of the same series and shall have
equal rights. Fully paid stock shall not be liable to any call and is
non-assessable. Holders of shares of common stock shall not have preemptive
rights unless granted by resolution of the Board of Directors. The Board of
Directors shall have authority to establish, by resolution, series of the
authorized preferred stock by fixing and determining the designations,
preferences, limitations, and relative rights, including voting rights, for the
shares to be included in such series.
ARTICLE V
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is:
1327 N. State, Orem, Utah 84057
and the name of its registered agent is: Joel Karren.
ARTICLE VI
DIRECTORS
The number of directors shall be fixed by the bylaws. The number of
directors constituting the Board of Directors of the Corporation at the time
these Articles of Incorporation are adopted shall be three and the names and
addresses of the persons who are to serve as directors until the next regular
annual meeting of the shareholders or until their successors are elected and
shall qualify are:
2
<PAGE> 3
NAME ADDRESS
- --------------------------------------------------------------------
Joel Karren 723 N. 480 W.
Orem, Utah 84057
Gaylord Karren 568 S Oak Dr.
Woodland Hills, Utah
John Hopkins 1327 N. State
Orem, Utah 84057
ARTICLE VII
INDEMNIFICATION
To the fullest extent permitted by applicable law or as it may
hereafter be amended, a director of this Corporation shall not be personally
liable to the Corporation or its shareholders for monetary damages for any
action taken or any failure to take action, as a director.
Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision in these Articles of Incorporation inconsistent with this
Article VII, shall eliminate or reduce the effect of this Article VII in respect
of any matter occurring, or any cause of action, suit or claim that, but for
this Article VII, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE VIII
ACTION WITHOUT MEETING
Any action which may be taken by the shareholders at a meeting may be
taken without a meeting, without prior notice, and without a vote, if the
holders of a simple majority, or such larger majority as is required by law or
these Articles of Incorporation, of the total outstanding shares of common stock
sign a written consent which sets forth the action.
The undersigned being the individual named in Article V, above, as the
registered agent of the Corporation, hereby consents to such appointment.
3
<PAGE> 4
REGISTERED AGENT
/s/ Joel Karren
---------------------------
JOEL KARREN
The undersigned officer of the Corporation executed these Articles of
Incorporation, certifying that the facts herein stated are true the 8th day of
May, 1997.
THE CORPORATION:
T-Co Manufacturing, Inc.
/s/ Joel Karren
---------------------------
By: JOEL KARREN
Its: President
4
<PAGE> 1
Exhibit 4.0
[FACE]**
INCORPORATED UNDER THE LAWS OF THE
STATE OF NEVADA
NUMBER SHARES
[Certificate No.] [No. of Shares]
CUSIP NO. 92330G 10 2
VENTURI TECHNOLOGY ENTERPRISES, INC.
20,000,000 AUTHORIZED SHARES $.001 PAR VALUE NON-ASSESSABLE
*******[no. of shares]*****
********[no. of shares]****
*********[no. of shares]***
**********[no. of shares]**
***********[no. of shares]*
THIS CERTIFIES THAT [SHAREHOLDER]
IS THE RECORD HOLDER OF **[NUMBER OF SHARES]**
Shares of VENTURI TECHNOLOGY ENTERPRISES, INC. Common Stock transferable on the
books of the Corporation in person or by duly authorized attorney upon surrender
of this Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated: [Date]
[Illegible Signature] [Illegible Signature]
Secretary President
[CORPORATE SEAL]
VENTURI TECHNOLOGY ENTERPRISES, INC.
NEVADA
"The shares represented by this certificate have not been registered by the
Securities Act of 1933. The shares have been acquired for investment and may not
be offered, sold or otherwise transferred in the absence of an effective
registration statement for the shares under the Securities Act of 1933 or prior
opinion of counsel satisfactory to the issuer that registration is not required
under that Act." [This paragraph appears in portrait format on the left side of
the page.]
**The text of the certificate is ringed by a decorative border.
<PAGE> 2
[BACK]
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ______ Custodian ______
(Cust) (Minor)
under Uniform Gifts to Minors
Act ___________________
(State)
Additional abbreviations may be used though not in the above list
For Value Received, ________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Shares of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated _______________________
________________________________________________________________________________
NOTICE: SIGNATURE MUST CORRESPOND TO THE NAME AS WRITTEN UPON
THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER, AND MUST BE GUARANTEED BY A BANK, BROKER OR
ANY OTHER ELIGIBLE GUARANTOR INSTITUTION THAT IS
AUTHORIZED TO DO SO UNDER THE SECURITIES TRANSFER AGENTS
MEDALLION PROGRAM (STAMP) UNDER RULES PROMULGATED BY THE
U.S. SECURITIES AND EXCHANGE COMMISSION.
"The shares represented by this certificate have not been registered by the
Securities Act of 1933. The shares have been acquired for investment and may not
be offered, sold or otherwise transferred in the absence of an effective
registration statement for the shares under the Securities Act of 1933 or prior
opinion of counsel satisfactory to the issuer that registration is not required
under that Act."
<PAGE> 1
Exhibit 4.3
CERTIFICATE OF DESIGNATION OF
PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS
FOR
VENTURI TECHNOLOGY ENTERPRISES, INC.
10% CUMULATIVE CONVERTIBLE SERIES A PREFERRED STOCK
AND
6% CUMULATIVE CONVERTIBLE SERIES B PREFERRED STOCK
Definitions. For purposes of this Certificate of Designation of
Preferences, Limitations, and Relative Rights, (the "Designation"), the
following definitions shall apply:
(a) "Company" and "Corporation" shall mean Venturi Technology
Enterprises, Inc.
(b) "Original Issue Date" shall mean, with respect to each Series of
Preferred Stock, the date upon which shares of each Series of Preferred
Stock are first issued.
(c) "Series A Preferred Stock" shall mean the 10% Cumulative
Convertible Series A Preferred Stock established by resolution of the
Board of Directors of the Company.
(d) "Series B Preferred Stock" shall mean the 6% Cumulative Convertible
Series B Preferred Stock established by resolution of the Board of
Directors of the Company.
10% CUMULATIVE CONVERTIBLE SERIES A PREFERRED STOCK
150,000 Shares Authorized
The Board of Directors of the Company has established by resolution, a
10% Cumulative Convertible Series A Preferred Stock, and has authorized the
issuance of up to 150,000 shares of such stock.
The 10% Cumulative Convertible Series A Preferred Stock established by
resolution of the Board of Directors of the Company shall have the following
preferences, limitations and relative rights:
1. Dividends.
(a) Dividend Preference. The holders of outstanding shares of Series A
Preferred Stock shall be entitled to receive, when and as declared by
the Board of Directors of the Company out of funds legally available
for the payment of dividends, cumulative quarterly cash dividends at
the annual rate of $1.00 per share, in preference to and in priority
over any dividends with respect to Common Stock. Dividends on the
Series A Preferred Stock shall accumulate from and including the
Original Issue Date and shall
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<PAGE> 2
be payable on the tenth day after the end of each calendar quarter with
the first payment due on the tenth day after the end of the first full
calendar quarter following the Original Issue Date. In the event funds
are not legally available to pay such dividends in cash, such dividends
shall, at the option of the Company, cumulate and be paid in cash at
such time as funds are then legally available to pay such dividends, or
be paid to holders of Preferred Shares in shares of the Company's no
par value common stock valued at the greater of $10.00 per share or 90%
of the then market value of the Company's common stock if such common
stock is then traded on a national exchange.
(b) Dividend Record Date. As the Board of Directors of the Company
declares dividends on the Series A Preferred Stock, the Company or a
selected agent, as Paying Agent, shall disburse such funds to the
holders of record of the Series A Preferred Stock as of the last day of
the quarter for which a dividend is being paid ("Record Date").
(c) Priority of Dividends. As long as shares of the Series A Preferred
Stock shall be outstanding, if the Company shall be in default or in
arrears in respect to the payment of dividends on the Series A
Preferred Stock or any stock subsequently issued that is of equal
priority to the Series A Preferred Stock ("Parity Stock") or with
respect to the optional redemption with respect to the Series A
Preferred Stock or the Parity Stock, the Company shall not declare, pay
or set apart any funds for the payment of dividends, redemption,
repurchase, retirement or sinking fund payment on any of the Common
Stock.
(d) Payment of Accumulated Dividends. Dividends in arrears with respect
to the Series A Preferred Stock may be declared and paid at any time by
the Company without interest or premium and shall be paid, as in the
case of regular dividends, to the holders of record of the Series A
Preferred Stock on the Record Date established with respect to such
payment in arrears. The ability of the Company to pay dividends on the
Series A Preferred Stock shall be limited by the availability of funds
and the provisions of the General Corporation Law of the State of
Nevada and any other applicable law.
2. Liquidation Rights.
(a) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Company, either voluntary or
involuntary, the holders of the Series A Preferred Stock shall be
entitled to receive, after all debts are paid, out of the assets of the
Company, the sum of $10.00 per share plus an amount equal to all
accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding up, before any payment shall be
made or any assets distributed to the holders of Common Stock.
-2-
<PAGE> 3
(b) Priority. If, upon any such liquidation, dissolution or winding up
of the Company, the assets to be distributed among the holders of the
Series A Preferred Stock are insufficient to permit the payment to such
holders of the full amount specified in the previous paragraph, then
the entire assets of the Company legally available for distribution
shall be distributed with equal priority and pro rata among the holders
of the Series A Preferred Stock and the Series B Preferred Stock in
proportion to the numbers of shares of Series A Preferred Stock and
Series B Preferred Stock held by them.
(c) Remaining Assets. After payment of the full $10.00 per share
liquidation preference plus any accumulated and unpaid dividends, the
holders of the Series A Preferred Stock will not share in any other
assets of the Company distributed to holders of equity securities.
(d) Reorganization. Neither the voluntary sale, conveyance, exchange or
transfer of all or any part of the property or assets of the Company,
nor the consolidation, merger or other business combination of the
Company with or into any corporation, shall be considered a voluntary
or involuntary liquidation, dissolution, or winding up of the Company.
3. Redemption. The Company shall have the option, but not the
obligation, to call the Series A Preferred Stock for redemption at any
time. The price paid to the holders of the Series A Preferred Stock by
the Company for any such redemption shall equal $11.00 per Share plus
any accrued or unpaid dividends to the date of the call for redemption.
Such redemption price shall, at the option of the holder of the Shares,
either (i) be paid in cash to the holder, or (ii) be converted into
Common stock of the Company at a conversion rate of 1.093585771 shares
of Common Stock for each share of Series A Preferred Stock.
4. Conversion. The holders of the Series A Preferred Stock
shall have conversion rights as follows:
(a) Right to Convert. Holders of shares of Series A Preferred Stock
shall have the right, exercisable at any time, to convert any or all of
such Shares into shares of Common Stock of the Company on the basis of
1.093585771 shares of Common Stock for each one share of Series A
Preferred Stock at the office of the Corporation or any transfer agent
for the Series A Preferred Stock, except that if any of the Series A
Preferred Stock is called for redemption, the conversion rights
pertaining thereto shall terminate at the close of business on the date
fixed for redemption unless the Company defaults on the payment of the
redemption price plus accumulated and unpaid dividends.
-3-
<PAGE> 4
(b) Merger or Reclassification. In the event of any merger of the
Company with or into any other corporation (other than a merger in
which the Company is a surviving corporation) or in the event of any
sale or transfer of all or substantially all of the assets of the
Company, or in the event of a reclassification, capital reorganization
or change of outstanding shares of common stock, any holder of the
Series A Preferred Stock will be entitled after the occurrence of such
event, to receive on conversion the consideration which the holder
would have received had such holder converted such holder's Series A
Preferred Stock to Common Stock immediately prior to the occurrence of
the event, and had such holder elected to receive the consideration in
the form and manner elected by the holders of Common Stock.
(c) Automatic Conversion. All shares of Series A Preferred Stock shall
automatically be converted into shares of Common Stock on the basis of
1.093585771 shares of Common Stock for one share of Series A Preferred
Stock prior to the consummation of a firmly underwritten public
offering of the Company's Common Stock.
(d) Mechanics of Conversion. Before any holder of Series A Preferred
Stock shall be entitled to convert the same into shares of Common
Stock, and to receive certificates therefor, he or she shall surrender
the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Series A Preferred
Stock, and shall give written notice to the Corporation at such office
that he or she elects to convert the same; provided, however, that in
the event of an automatic conversion pursuant to the preceding
paragraph, the outstanding shares of Series A Preferred Stock shall be
converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent;
provided further, however, that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion unless either the certificates
evidencing such shares of Series A Preferred Stock are delivered to the
Corporation or its transfer agent as provided above, or the holder
notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. The
Corporation shall, as soon as practicable after such delivery, or after
such agreement and indemnification, issue and deliver at such office to
such holder of Series A Preferred Stock, a certificate or certificates
for the number of shares of Common Stock to which he or she shall be
entitled as aforesaid, plus, if applicable, a check payable to the
holder in the amount of any declared and unpaid dividends on the
converted Series A Preferred Stock. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or
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<PAGE> 5
holders of such shares of Common Stock on such date; provided, however,
that if the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, as
amended, the conversion may, at the option of any holder tendering
Series A Preferred Stock for conversion, be conditioned upon the
closing of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series A Preferred Stock shall not be deemed to
have converted such Series A Preferred Stock until immediately prior to
the closing of the sale of such securities.
(e) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of
assets, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying
out of all the provisions of this Section and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series A Preferred Stock
against impairment.
(f) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number
of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series A Preferred
Stock, the Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
5. Registration Rights. Holders of Series A Preferred Stock
shall have no demand registration rights to require registration of the
Series A Preferred Stock or the Common Stock into which the Series A
Preferred Stock is convertible under any state or federal securities
laws. Holders of Series A Preferred Stock, voting as a class, shall be
entitled to "piggyback" registration rights with respect to any
securities registration undertaken by the Company, subject to the right
of the Company or its underwriters in such registration to reduce the
number of shares, including to zero, which are proposed to be
registered on behalf of holders of Series A Preferred Stock pro rata in
view of market conditions.
6. Voting. Each holder of shares of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of shares
of Common Stock into which such shares of Series A Preferred Stock held
by such holder of Series A
-5-
<PAGE> 6
Preferred Stock could then be converted. The holders of shares of the
Series A Preferred Stock shall be entitled to vote on all matters on
which the Common Stock shall be entitled to vote, unless otherwise
required by applicable law or in cases where the rights and privileges
of the Common Stock holders may be altered or diminished. The holders
of Series A Preferred Stock shall be entitled to notice of any
shareholders meeting in accordance with the Bylaws of the Company.
Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock held by each
holder could be converted), shall be disregarded.
7. Amendments and Changes.
(a) No Series Voting. Other than as provided herein or by law, there
shall be no series voting.
(b) Approval by Class. As long as any of the Series A Preferred Stock
shall be issued and outstanding, the Company shall not, without first
obtaining the approval (by vote or consent as provided by law) of the
holders of a majority of the total number of shares of the Series A
Preferred Stock and a majority of the Common Stock then outstanding:
(i) alter or change the rights, preferences, or
privileges of the Series A Preferred Stock materially
or adversely; or
(ii) increase the authorized number of shares of
Series A Preferred Stock; or
(iii) create any new class of shares having rights,
preferences or privileges senior to the Series A
Preferred Stock holders as to dividend rights,
redemption rights or liquidation rights.
8. Notices. Any notice required by the provisions of this
Designation to be given to the holders of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at such holder's
address appearing on the books of the Company.
6% CUMULATIVE CONVERTIBLE SERIES B PREFERRED STOCK
315,000 Shares Authorized
The Board of Directors of the Company has established by resolution, a
6% Cumulative Convertible Series B Preferred Stock, and has authorized the
issuance of up to 315,000 shares
-6-
<PAGE> 7
of such stock.
The 6% Cumulative Convertible Series B Preferred Stock established by
resolution of the Board of Directors of the Company shall have the following
preferences, limitations and relative rights:
1. Dividends.
(a) Dividend Preference. The holders of outstanding shares of Series B
Preferred Stock shall be entitled to receive cumulative quarterly
dividends at the annual rate of 6% per annum, which dividends shall be
paid by the issuance of shares of the Company's common stock, par value
$0.001 per share ("Common Stock") based on the thirty (30) day average
closing bid price of the Common Stock prior to the dividend date,
provided that if there is no trading in the Common Stock for thirty
(30) days prior to the dividend date, the dividend shall be calculated
using a value of the Common Stock of $5.00 per share.
(b) Dividend Record Date. The record date for determining holders of
Series B Preferred Stock entitled to a stock dividend shall be the last
day of the quarter for which a dividend is being declared ("Record
Date").
(c) Priority of Dividends. As long as shares of the Series B Preferred
Stock shall be outstanding, if the Company shall be in default or in
arrears in respect to the payment of stock dividends on the Series B
Preferred Stock or any stock previously or subsequently issued that is
of equal priority to the Series B Preferred Stock ("Parity Stock"), the
Company shall not declare, pay or set apart any funds for the payment
of dividends, redemption, repurchase, retirement or sinking fund
payment on any of the Common Stock. The Series B Preferred Stock shall
have equal priority with the Series A Preferred Stock with respect to
the payment of dividends.
(d) Payment of Accumulated Dividends. Dividends in arrears with respect
to the Series B Preferred Stock may be declared and paid at any time by
the Company without interest or premium and shall be paid, as in the
case of regular dividends, to the holders of record of the Series B
Preferred Stock on the Record Date established with respect to such
payment in arrears.
2. Liquidation Rights.
(a) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Company, either voluntary or
involuntary, the holders of the Series B Preferred Stock shall be
entitled to receive, after all debts are paid, out of the assets of the
Company, pro-rata with the holders of Series A Preferred Stock and the
holders of any Parity Stock, the sum of $10.00 per share plus an amount
equal to the dollar value of all accumulated and unissued stock
dividends thereon to the date fixed for
-7-
<PAGE> 8
liquidation, dissolution or winding up, before any payment shall be
made or any assets distributed to the holders of Common Stock.
(b) Priority. If, upon any such liquidation, dissolution or winding up
of the Company, the assets to be distributed among the holders of the
Series B Preferred Stock are insufficient to permit the payment to such
holders of the full amount specified in the previous paragraph, then
the entire assets of the Company legally available for distribution
shall be distributed with equal priority and pro rata among the holders
of the Series A Preferred Stock and the Series B Preferred Stock in
proportion to the numbers of shares of Series A Preferred Stock and
Series B Preferred Stock held by them.
(c) Remaining Assets. After payment of the full $10.00 per share
liquidation preference plus any accumulated and unpaid dividends, the
holders of the Series B Preferred Stock will not share in any other
assets of the Company distributed to holders of equity securities.
(d) Reorganization. Neither the voluntary sale, conveyance, exchange or
transfer of all or any part of the property or assets of the Company,
nor the consolidation, merger or other business combination of the
Company with or into any corporation, shall be considered a voluntary
or involuntary liquidation, dissolution, or winding up of the Company.
3. Conversion. The holders of the Series B Preferred Stock
shall have conversion rights as follows:
(a) Right to Convert. Holders of shares of Series B Preferred Stock
shall have the right, exercisable at any time, to convert any or all of
such Shares into shares of Common Stock of the Company on the basis of
five (5) shares of Common Stock for each share of Series B Preferred
Stock at the office of the Corporation or any transfer agent for the
Series B Preferred Stock, provided that the conversion ratio shall be
adjusted to take into account any unpaid dividends.
(b) Merger or Reclassification. In the event of any merger of the
Company with or into any other corporation (other than a merger in
which the Company is a surviving corporation) or in the event of any
sale or transfer of all or substantially all of the assets of the
Company, or in the event of a reclassification, capital reorganization
or change of outstanding shares of common stock, any holder of the
Series B Preferred Stock will be entitled after the occurrence of such
event, to receive on conversion the consideration which the holder
would have received had such holder converted such holder's Series B
Preferred Stock to Common Stock immediately prior to the occurrence of
the event, and had such holder elected to receive the consideration in
the form and manner elected by the holders of Common Stock.
-8-
<PAGE> 9
(c) Mechanics of Conversion. Before any holder of Series B Preferred
Stock shall be entitled to convert the same into shares of Common
Stock, and to receive certificates therefor, he or she shall surrender
the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Series B Preferred
Stock, and shall give written notice to the Corporation at such office
that he or she elects to convert the same. The Corporation shall, as
soon as practicable after such notice, issue and deliver at such office
to such holder of Series B Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he or
she shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date
of such surrender of the shares of Series B Preferred Stock to be
converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock
on such date; provided, however, that if the conversion is in
connection with an underwritten offer of securities registered pursuant
to the Securities Act of 1933, as amended, the conversion may, at the
option of any holder tendering Series B Preferred Stock for conversion,
be conditioned upon the closing of the sale of securities pursuant to
such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Series B Preferred
Stock shall not be deemed to have converted such Series B Preferred
Stock until immediately prior to the closing of the sale of such
securities.
(d) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of
assets, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the
Corporation but will at all times in good faith assist in the carrying
out of all the provisions of this Section and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Preferred Stock
against impairment.
(e) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series B Preferred Stock, such number
of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series B Preferred
Stock, the Corporation shall take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
5. Voting. The shares of Series B Preferred Stock shall
have no vote on
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<PAGE> 10
any matter coming before a vote of, or requiring action of, the equity
holders of the Company, unless and until such shares are converted to
Common Stock, unless otherwise expressly provided herein or as required
by law, provided, however, that for a period of five (5) years from the
earlier of the Original Issue Date or December 31, 1997, the holders of
the Series B Preferred Stock shall have the right to designate one (1)
member of the Board of Directors, and the Company shall cause such
designee to be elected to the Board of Directors of the Company.
6. Amendments and Changes.
(a) No Series Voting. Other than as provided herein or by law, there
shall be no series voting.
(b) Approval by Class. As long as any of the Series B Preferred Stock
shall be issued and outstanding, the Company shall not, without first
obtaining the approval (by vote or consent as provided by law) of the
holders of a majority of the total number of shares of the Series B
Preferred Stock and a majority of the Common Stock then outstanding:
(i) alter or change the rights, preferences, or
privileges of the Series B Preferred Stock materially
or adversely; or
(ii) increase the authorized number of shares of
Series B Preferred Stock; or
(iii) create any new class of shares having rights,
preferences or privileges senior to the Series B
Preferred Stock holders as to dividend rights,
redemption rights or liquidation rights.
7. Notices. Any notice required by the provisions of this
Designation to be given to the holders of Series B Preferred Stock
shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at such holder's
address appearing on the books of the Company.
-10-
<PAGE> 11
CERTIFICATE OF PRESIDENT AND SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned John Hopkins, President of Venturi Technology
Enterprises, Inc., a Nevada corporation (the "Corporation"), and Randy K.
Johnson, Secretary of the Corporation do hereby certify that the Articles of
Incorporation for the Corporation provide that Series of preferred stock may be
established by resolution of the Board of Directors, and that the above and
foregoing Certificate of Designation of Preferences, Limitations and Relative
Rights of said Corporation was duly and regularly adopted as such by a
resolution of all of the members of the Board of Directors of the Corporation on
December 24, 1997.
DATED: December 24, 1997.
/s/ John Hopkins
---------------------------------------
John Hopkins
President
/s/ Randy Johnson
---------------------------------------
Randy K. Johnson
Secretary
ACKNOWLEDGMENT
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 24th day of December, personally appeared before me
John Hopkins, President of Venturi Technology Enterprises, Inc. and Randy K.
Johnson, Secretary of Venturi Technology Enterprises, Inc., personally known to
me or proved to me on the basis of satisfactory evidence to be the persons whose
names are signed on the preceding document, and acknowledged to me that they
signed it voluntarily for its stated purpose.
/s/ Rebekah B. Austin
---------------------------------------
[NOTARY SEAL] NOTARY PUBLIC
-11-
<PAGE> 1
Exhibit 4.4
ACTION BY UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
VENTURI TECHNOLOGIES, INC.
The undersigned, being all of the directors of Venturi Technologies, Inc.
(the "Company"), a Nevada corporation, acting pursuant to Section 78.315 of the
Nevada Corporations Code, do hereby approve and adopt, in our capacity as
directors of this corporation, acting without a meeting, the following
resolutions:
Creation of Series C Preferred Stock
WHEREAS, the Board of Directors deems it to be in the best interest of
the Company to establish a series of preferred stock to be issued in a
private placement of such securities in order to raise capital for the
Corporation.
NOW, THEREFORE, BE IT RESOLVED, that the Company hereby establishes a
series of preferred stock with up to 1,000,000 shares authorized to be
issued at an original issue price of $2.05 per share.
FURTHER RESOLVED, that the series of preferred stock established
hereby shall be 6% Cumulative Convertible Non-Voting Preferred
Stock, and the designations, preferences, limitations, and relative rights,
including voting rights, of the 6% Cumulative Convertible Non-Voting
Preferred Stock, shall be as set forth in the Certificate of Designation of
Preferences, Limitations and Relative Rights attached hereto as Exhibit A.
FURTHER RESOLVED, that the officers of the Corporation are directed to
file such documents as are necessary to effect the recording and filing of
these resolutions and the establishment of the 6% Cumulative Convertible
Non-Voting Preferred Stock with the Nevada Secretary of State and any other
government agency which would be necessary or helpful.
IN WITNESS WHEREOF, the undersigned have executed this Unanimous Written
Consent as of July __, 1998.
/s/Gaylord Karren
---------------------
Gaylord Karren
---------------------
John Hopkins
<PAGE> 2
EXHIBIT A
6% CUMULATIVE CONVERTIBLE NON-VOTING SERIES C PREFERRED STOCK
1,000,000 Shares Authorized
The Board of Directors of the Company has established by resolution, a 6%
Cumulative Convertible Non-Voting Series C Preferred Stock, and has authorized
the issuance of up to 1,000,000 shares of such stock.
The 6% Cumulative Convertible Non-Voting Series C Preferred Stock
established by resolution of the Board of Directors of the Company shall have
the following preferences, limitations and relative rights:
i. Dividends
(1) Dividend Preference. The holders of outstanding shares of Series C
Preferred Stock shall be entitled to receive cumulative quarterly dividends
at the annual rate of 6% per annum, which dividends shall be paid in cash
or by the issuance of shares of the Company's common stock, par value
$0.001 per share ("Common Stock") based on the thirty (30) day average
closing bid price of the Common Stock prior to the dividend date, provided
that if there is no trading in the Common Stock for thirty (30) days prior
to the dividend date, the dividend shall be calculated using a value of the
Common Stock of $5.00 per share.
(2) Dividend Record Date. The record date for determining holders of
Series C Preferred Stock entitled to a stock dividend shall be the last day
of the quarter for which a dividend is being declared ("Record Date").
(3) Priority of Dividends. As long as shares of the Series C Preferred
Stock shall be outstanding, if the Company shall be in default or in
arrears in respect to the payment of stock dividends on the Series C
Preferred Stock or any stock previously or subsequently issued that is of
equal priority to the Series C Preferred Stock ("Parity Stock"), the
Company shall not declare, pay or set apart any funds for the payment of
dividends, redemption, repurchase, retirement or sinking fund payment on
any of the Common Stock. The Series C Preferred Stock shall have equal
priority with the Series A and Series B Preferred Stock with respect to the
payment of dividends.
(4) Payment of Accumulated Dividends. Dividends in arrears with respect to
the Series C Preferred Stock may be declared and paid at any time by the
Company without interest or premium and shall be paid, as in the case of
regular dividends, to the holders of record of the Series C Preferred Stock
on the Record Date established with respect to such payment in arrears.
<PAGE> 3
ii. Liquidation Rights.
(1) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Company, either voluntary or
involuntary, the holders of the Series C Preferred Stock shall be
entitled to receive, after all debts are paid, out of the assets of the
Company, pro-rata with the holders of Series A and Series B Preferred
Stock and the holders of any Parity Stock, the sum of $2.05 per share
plus an amount equal to the dollar value of all accumulated and
unissued stock dividends thereon to the date fixed for liquidation,
dissolution or winding up, before any payment shall be made or any
assets distributed to the holders of Common Stock.
(2) Priority. If, upon any such liquidation, dissolution or
winding up of the Company, the assets to be distributed among the
holders of the Series C Preferred Stock are insufficient to permit the
payment to such holders of the full amount specified in the previous
paragraph, then the entire assets of the Company legally available for
distribution shall be distributed with equal priority and pro-rata
among the holders of the Series A Preferred Stock, the Series B
Preferred Stock, and the Series C Preferred Stock in proportion to the
numbers of shares of Series A Preferred Stock, Series B Preferred
Stock, and the Series C Preferred Stock held by them.
(3) Remaining Assets. After payment of the full $2.05 per share
liquidation preference plus any accumulated and unpaid dividends, the
holders of the Series C Preferred Stock will not share in any other
assets of the Company distributed to holders of equity securities.
(4) Reorganization. Neither the voluntary sale, conveyance,
exchange or transfer of all or any part of the property or assets of
the Company, nor the consolidation, merger or other business
combination of the Company with or into any corporation, shall be
considered a voluntary or involuntary liquidation, dissolution, or
winding up of the Company.
iii. Conversion. The holders of the Series C Preferred
Stock shall have conversion rights as follows:
(1) Right to Convert. Holders of shares of Series C Preferred
Stock shall have the right, exercisable at any time, to convert any or
all of such Stock into shares of Common Stock of the Company on the
basis one (1) share of Common Stock for each share of Series C
Preferred Stock at the office of the Corporation or any transfer agent
for the Series C Preferred Stock, provided that the conversion ratio
shall be adjusted to take into account any unpaid dividends.
(2) Merger or Reclassification. In the event of any merger of the
Company with or into any other corporation (other than a merger in
which the Company is a surviving corporation) or in the event of any
sale or transfer of all or substantially all of the assets of the
Company, or in the event of a reclassification, capital reorganization
or change of outstanding shares of common stock, any holder of the
Series C Preferred Stock will be entitled after the occurrence of such
event, to receive on conversion the consideration which the holder
would
<PAGE> 4
have received had such holder converted such holder's Series C Preferred Stock
to Common Stock immediately prior to the occurrence of the event, and had such
holder elected to receive the consideration in the form and manner elected by
the holders of Common Stock.
(3) Mechanics of Conversion. Before any holder of Series C Preferred Stock
shall be entitled to convert the same into shares of Common Stock, and to
receive certificates therefor, he or she shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for the Series C Preferred Stock, and shall give written
notice to the Corporation at such office that he or she elects to convert the
same. The Corporation shall, as soon as practicable after such notice, issue
and deliver at such office to such holder of Series C Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he or she shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series C Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date; provided, however, that if
the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Series C Preferred Stock for
conversion, be conditioned upon the closing of the sale of securities pursuant
to such offering, in which event the person(s) entitled to receive the Common
Stock issuable upon such conversion of the Series C Preferred Stock shall not
be deemed to have converted such Series C Preferred Stock until immediately
prior to the closing of the sale of such securities.
(4) No Impairment. The Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at all times in
good faith assist in the carrying out of all the provisions of this Section and
in the taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Series C Preferred Stock
against impairment.
(5) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series C Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
then outstanding shares of the Series C Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Series C Preferred Stock, the Corporation shall take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
iv. Voting. The shares of Series C Preferred Stock shall have no vote on
any matter coming before a vote of, or requiring action of, the equity holders
of the Company,
<PAGE> 5
unless and until such shares are converted to Common Stock, unless otherwise
expressly provided herein or as required by law.
v. Amendments and Changes.
(1) No Series Voting. Other than as provided herein or in the Company's
bylaws, there shall be no series voting.
(2) Approval by Class. As long as any of the Series C Preferred Stock shall
be issued and outstanding, the Company shall not, without first obtaining the
approval (by vote or consent as provided by law) of the holders of a majority
of the total number of shares of the Series C Preferred Stock and a majority of
the Common Stock outstanding:
(a) alter or change the rights, preferences, or privileges of
the Series C Preferred Stock materially or adversely; or
(b) increase the authorized number of shares of Series C
Preferred Stock; or
(c) create any new class of shares having rights, preferences or
privileges senior to the Series C Preferred Stock holders as to
dividend rights, redemption rights or liquidation rights.
vi. Notices. Any notice required by the provisions of this
Designation to be given to the holders of Series C Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appearing on the
books of the Company.
<PAGE> 6
CERTIFICATE OF PRESIDENT AND SECRETARY
KNOW ALL MEN BY THESE PRESENTS
That the undersigned John Hopkins, President of Venturi Enterprises, Inc.,
a Nevada corporation (the "Corporation"), and Ronald Karren, Secretary of the
Corporation to hereby certify that the Articles of Incorporation for the
Corporation provide that Series of preferred stock may be established by
resolution of the Board of Directors, and that the above and foregoing
Certificate of Designation of Preferences, Limitations and Relative Rights of
said Corporation was duly and regularly adopted as such by a resolution of all
of the members of the Board of Directors of the Corporation on July____, 1998.
DATED: July _____, 1998.
_________________________________
John Hopkins, President
_________________________________
Ronald Karren, Secretary
ACKNOWLEDGMENT
STATE OF UTAH )
) ss
COUNTY OF SALT LAKE )
On the ______ day of July, 1998, personally appeared before me John
Hopkins, President of Venturi Technology Enterprises, Inc. and Ronald Karren,
Secretary of Venturi Technology Enterprises, Inc., personally known to me or
proved to me on the basis of satisfactory evidence to be the persons whose names
are signed on the preceding document, and acknowledged to me that they signed it
voluntarily for its stated purpose.
_________________________________
Notary Public
<PAGE> 1
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 31st day of December, 1997 by and between VENTURI
TECHNOLOGY ENTERPRISES, INC., a Nevada corporation (the "Company") and EQUITY
SERVICES, LTD., a Nevis company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring (i) Five Thousand (5,000) shares
of the Company's Series B 6% Cumulative Convertible Preferred Stock, stated
value $10.00 per share (the "Series B Preferred Stock") pursuant to that certain
Placement Agreement by and between the Company and the Shareholder dated
December 31 , 1997 (the "Placement Agreement") and (ii) an option to purchase up
to Fifty Thousand (50,000) shares (the "Option Shares") of the Company's common
stock, par value $0.001 per share (the "Common Stock") pursuant to that certain
Placement Agent's Option Certificate of even date herewith (the Series B
Preferred Stock and the Option Shares are referred to collectively as the
"Shares"); and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the Shares and the Shareholder desires to obtain
such registration rights, subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and Exchange
Commission and any successor agency.
(b) The terms "register", "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act (as herein defined) and the
declaration or ordering of effectiveness of such registration statement or
document.
(c) For purposes of this Agreement, the term "Registrable Stock" shall
mean (i) any shares of Common Stock issued or issuable upon the conversion of
the Series B Preferred Stock, (ii) any Common Stock issued by way of a stock
split, reorganization, merger or consolidation, (iii) any Common Stock issued as
a dividend on the Series B Preferred Stock and (iv) the Option Shares. For
purposes of this Agreement, any Registrable Stock shall cease to be Registrable
Stock when (v) a registration statement covering such Registrable
<PAGE> 2
Stock has been declared effective and such Registrable Stock has been disposed
of pursuant to such effective registration statement, (w) such Registrable Stock
is sold pursuant to Rule 144 (or any similar provision then in force) under the
1933 Act, (x) such Registrable Stock is eligible to be sold pursuant to Rule
144(k) under the 1933 Act, (y) such Registrable Stock has been otherwise
transferred, no stop transfer order affecting such stock is in effect and the
Company has delivered new certificates or other evidences of ownership for such
Registrable Stock not bearing any legend indicating that such shares have not
been registered under the 1933 Act, or (z) such Registrable Stock is sold by a
person in a transaction in which the rights under the provisions of this
Agreement are not assigned.
(d) The term "Holder" shall mean the Shareholder or any transferee or
assignee thereof to whom the rights under this Agreement are assigned in
accordance with Section 10 hereof, provided that the Shareholder or such
transferee or assignee shall then own the Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of 1933, as
amended.
(f) An "affiliate of such Holder" shall mean a person who controls, is
controlled by or is under common control with a Holder, or the spouse or
children (or a trust exclusively for the benefit of the spouse and/or children)
of a Holder, or, in the case of a Holder that is a partnership, its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated organization or
association or other entity, including any governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or Holders of in
the aggregate at least a majority of the Registrable Stock.
(i) References in this Agreement to any rules, regulations or forms
promulgated by the Commission shall include rules, regulations and forms
succeeding to the functions thereof, whether or not bearing the same
designation.
2. Demand Registration.
(a) Commencing June 30, 1999, any Requesting Holders may make a written
request to the Company (specifying that it is being made pursuant to this
Section 2) that the Company file a registration statement under the 1933 Act (or
a similar document pursuant to any other statute then in effect corresponding to
the 1933 Act) covering the registration of Registrable Stock. In such event, the
Company shall (x) within ten (10) days thereafter notify in writing all other
Holders of Registrable Stock of such request, and (y) use its best efforts to
cause to be registered under the 1933 Act all Registrable Stock that the
Requesting Holders and such other Holders have, within forty-five (45) days
after the Company has given such notice, requested be registered.
2
<PAGE> 3
(b) If the Requesting Holders intend to distribute the Registrable
Stock covered by their request by means of an underwritten offering, they shall
so advise the Company as a part of their request pursuant to Section 2.(a)
above, and the Company shall include such information in the written notice
referred to in clause (x) of Section 2.(a) above. In such event, the Holder's
right to include its Registrable Stock in such registration shall be conditioned
upon such Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the extent
provided in this Section 2. All Holders proposing to distribute Registrable
Stock through such underwritten offering shall enter into an underwriting
agreement in customary form with the underwriter or underwriters. Such
underwriter or underwriters shall be selected by a majority in interest of the
Requesting Holders and shall be approved by the Company, which approval shall
not be unreasonably withheld; provided, that all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such Holders and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement shall be conditions
precedent to the obligations of such Holders; and provided further, that no
Holder shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, the Registrable Stock of such
Holder and such Holder's intended method of distribution and any other
representation required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to the
contrary, if the managing underwriter of an underwritten offering of the
Registrable Stock requested to be registered pursuant to this Section 2 advises
the Requesting Holders in writing that in its opinion marketing factors require
a limitation of the number of shares to be underwritten, the Requesting Holders
shall so advise all Holders of Registrable Stock that would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Stock that
may be included in such underwritten offering shall be allocated among all such
Holders, including the Requesting Holders, in proportion (as nearly as
practicable) to the amount of Registrable Stock requested to be included in such
registration by each Holder at the time of filing the registration statement;
provided that in the event of such limitation of the number of shares of
Registrable Stock to be underwritten, the Holders shall be entitled to an
additional demand registration pursuant to this Section 2. If any Holder of
Registrable Stock disapproves of the terms of the underwriting, such Holder may
elect to withdraw by written notice to the Company, the managing underwriter and
the Requesting Holders. The securities so withdrawn shall also be withdrawn from
registration.
(d) Notwithstanding any provision of this Agreement to the contrary,
the Company shall not be required to effect a registration pursuant to this
Section 2 during the period starting with the fourteenth (14th) day immediately
preceding the date of an anticipated filing by the Company of, and ending on a
date ninety (90) days following the effective date of, a registration statement
pertaining to a public offering of securities for the account of the Company;
provided, that the Company shall actively employ in good faith all reasonable
3
<PAGE> 4
efforts to cause such registration statement to become effective; and provided
further, that the Company's estimate of the date of filing such registration
statement shall be made in good faith.
(e) The Company shall be obligated to effect and pay for a total of
only two (2) registrations pursuant to this Section 2, unless increased pursuant
to Section 2.(c) hereof; provided, that a registration requested pursuant to
this Section 2 shall not be deemed to have been effected for purposes of this
Section 2.(e), unless (i) it has been declared effective by the Commission, (ii)
if it is a shelf registration, it has remained effective for the period set
forth in Section 3.(b), (iii) the offering of Registrable Stock pursuant to such
registration is not subject to any stop order, injunction or other order or
requirement of the Commission (other than any such action prompted by any act or
omission of the Holders), and (iv) no limitation of the number of shares of
Registrable Stock to be underwritten has been required pursuant to Section 2.(c)
hereof.
3. Obligations of the Company. Whenever required under Section 2 to use
its best efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than ninety (90)
days after receipt of a request to file a registration statement with respect to
such Registrable Stock, a registration statement on any form for which the
Company then qualifies or which counsel for the Company shall deem appropriate
and which form shall be available for the sale of such issue of Registrable
Stock in accordance with the intended method of distribution thereof, and use
its best efforts to cause such registration statement to become effective as
promptly as practicable thereafter; provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
will (i) furnish to one (1) counsel selected by the Requesting Holders copies of
all such documents proposed to be filed, and (ii) notify each such Holder of any
stop order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
such period of time as would satisfy the holding period requirements of Rule
144(k) promulgated by the Commission with respect to the Shares or such shorter
period which will terminate when all Registrable Stock covered by such
registration statement has been sold (but not before the expiration of the forty
(40) or ninety (90) day period referred to in Section 4(3) of the 1933 Act and
Rule 174 thereunder, if applicable), and comply with the provisions of the 1933
Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
4
<PAGE> 5
(c) furnish to each Holder and any underwriter of Registrable Stock to
be included in a registration statement copies of such registration statement as
filed and each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such Holder
may reasonably request in order to facilitate the disposition of the Registrable
Stock owned by such Holder;
(d) use its best efforts to register or qualify such Registrable Stock
under such other securities or blue sky laws of such jurisdictions as any
selling Holder or any underwriter of Registrable Stock reasonably requests, and
do any and all other acts which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in such jurisdictions of the
Registrable Stock owned by such Holder, provided that the Company will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3.(d) hereof,
(ii) subject itself to taxation in any such jurisdiction, or (iii) consent to
general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock covered by such
registration statement to be registered with or approved by such other
governmental agencies or other authorities as may be necessary by virtue of the
business and operations of the Company to enable the selling Holders thereof to
consummate the disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and any
underwriter thereof, at any time when a prospectus relating thereto is required
to be delivered under the 1933 Act (even if such time is after the period
referred to in Section 3.(b)), of the happening of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Stock, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances being
made not misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
seller or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such Inspector,
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement. Records or other
information which the Company determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records
5
<PAGE> 6
or other information is necessary to avoid or correct a misstatement or omission
in the registration statement, or (ii) the release of such Records or other
information is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Each selling Holder shall, upon learning that disclosure
of such Records or other information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records or
other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the date that
such shares of Registrable Stock are delivered to the underwriters for sale
pursuant to such registration or, if such Registrable Stock is not being sold
through underwriters, on the date that the registration statement with respect
to such shares of Registrable Stock becomes effective, (1) a signed opinion,
dated such date, of the legal counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the Requesting
Holders as to such matters as such underwriters or the Requesting Holders, as
the case may be, may reasonably request and as would be customary in such a
transaction; and (2) a letter dated such date, from the independent certified
public accountants of the Company, addressed to the underwriters, if any, and if
such Registrable Stock is not being sold through underwriters, then to the
Requesting Holders and, if such accountants refuse to deliver such letter to
such Holder, then to the Company (i) stating that they are independent certified
public accountants within the meaning of the 1933 Act and that, in the opinion
of such accountants, the financial statements and other financial data of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act, and (ii) covering such
other financial matters (including information as to the period ending not more
than five (5) business days prior to the date of such letter) with respect to
the registration in respect of which such letter is being given as the
Requesting Holders may reasonably request and as would be customary in such a
transaction;
(i) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Stock to be so
included in the registration statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, but not later than eighteen (18) months after
the effective date of the registration statement, an earnings statement covering
the period of at least twelve (12) months beginning with the first full month
after the effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the 1933 Act; and
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<PAGE> 7
(k) use its best efforts to cause all such Registrable Stock to be
listed on the Nasdaq SmallCap Market and/or any other securities exchange on
which similar securities issued by the Company are then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described Section 3.(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Stock pursuant to
the registration statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.(f) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 3.(f) hereof.
4. Incidental Registration. Commencing June 30, 1999, if the
Company determines that it shall file a registration statement under the 1933
Act (other than a registration statement on a Form S-4 or S-8 or filed in
connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders) on any form that would also permit the
registration of the Registrable Stock and such filing is to be on its behalf
and/or on behalf of selling holders of its securities for the general
registration of its common stock to be sold for cash, at each such time the
Company shall promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than thirty (30) days from the date of
such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. Upon the written request of any Holder received
by the Company no later than twenty (20) days after the date of the Company's
notice, the Company shall use its best efforts to cause to be registered under
the 1933 Act all of the Registrable Stock that each such Holder has so requested
to be registered. If, in the written opinion of the managing underwriter or
underwriters (or, in the case of a non-underwritten offering, in the written
opinion of the placement agent, or if there is none, the Company), the total
amount of such securities to be so registered, including such Registrable Stock,
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to the then current market value of such
securities, or (ii) without otherwise
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<PAGE> 8
materially and adversely affecting the entire offering, then the amount of
Registrable Stock to be offered for the accounts of Holders shall be reduced pro
rata to the extent necessary to reduce the total amount of securities to be
included in such offering to the recommended amount; provided, that if
securities are being offered for the account of other Persons as well as the
Company, such reduction shall not represent a greater fraction of the number of
securities intended to be offered by Holders than the fraction of similar
reductions imposed on such other Persons other than the Company over the amount
of securities they intended to offer.
5. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law, each Holder
whose Registrable Stock is included in a registration statement agrees not to
effect any public sale or distribution of the issue being registered or a
similar security of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the 1933 Act, during the fourteen (14) days prior to, and during
the ninety (90) day period beginning on, the effective date of such registration
statement (except as part of the registration), if and to the extent requested
by the Company in the case of a nonunderwritten public offering or if and to the
extent requested by the managing underwriter or underwriters in the case of an
underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others. The Company
agrees (i) not to effect any public sale or distribution of any securities
similar to those being registered, or any securities convertible into or
exchangeable or exercisable for such securities, during the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the effective date
of any registration statement in which Holders are participating (except as part
of such registration), if and to the extent requested by the Holders in the case
of a non-underwritten public offering or if and to the extent requested by the
managing underwriter or underwriters in the case of an underwritten public
offering; and (ii) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any securities
convertible into or exchangeable or exercisable for such securities (other than
pursuant to an effective registration statement) shall contain a provision under
which holders of such securities agree not to effect any public sale or
distribution of any such securities during the periods described in (i) above,
in each case including a sale pursuant to Rule 144 under the 1933 Act.
6. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Section 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The
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<PAGE> 9
selling Holders shall bear and pay the underwriting commissions and discounts
applicable to the Registrable Stock offered for their account in connection with
any registrations, filings and qualifications made pursuant to this Agreement.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify, to
the full extent permitted by law, each Holder, its officers, directors and
agents and each Person who controls such Holder (within the meaning of the 1933
Act) against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein (in case of a prospectus or
preliminary prospectus, in the light of the circumstances under which they were
made) not misleading. The Company will also indemnify any underwriters of the
Registrable Stock, their officers and directors and each Person who controls
such underwriters (within the meaning of the 1933 Act) to the same extent as
provided above with respect to the indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any registration
statement in which a Holder is participating, each such Holder will furnish to
the Company in writing such information with respect to such Holder as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and agrees to indemnify, to the extent permitted by law,
the Company, its directors and officers and each Person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact or any omission or alleged omission of a material fact required
to be stated in the registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto or necessary to make the
statements therein (in the case of a prospectus or preliminary prospectus, in
the light of the circumstances under which they were made) not misleading.
Notwithstanding the foregoing, the liability of each such Holder under this
Section 7.(b) shall be limited to an amount equal to the initial public offering
price of the Registrable Stock sold by such Holder, unless such liability arises
out of or is based on willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such Person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such Person will claim indemnification or contribution
pursuant to this Agreement and, unless in the reasonable judgment of such
indemnified party, a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel reasonably
satisfactory to such indemnified party. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such
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<PAGE> 10
consent will not be unreasonably withheld). Failure by such Person to provide
said notice to the indemnifying party shall itself not create liability except
to the extent of any injury caused thereby. No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. If the indemnifying party is not entitled to, or elects not to,
assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one (1) counsel with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnity provided for in this
Section 7 is unavailable to, or is insufficient to hold harmless, an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties; and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7.(c), any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 7.(a) and 7.(b) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 7.
10
<PAGE> 11
8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
10. Transfer of Registration Rights. The registration rights of
any Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this Section
10, no transfer of Registrable Stock shall cause such Registrable Stock to lose
such status.
11. Mergers, Etc. The Company shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation or reorganization, agree in writing
to assume the obligations of the Company under this Agreement, and for that
purpose references hereunder to "Registrable Stock" shall be deemed to be
references to the securities which the Holders would be entitled to receive in
exchange for Registrable Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if each Holder is entitled to
receive in exchange for its Registrable Stock consideration consisting solely of
(i) cash, (ii) securities of the acquiring corporation which may be immediately
sold to the public without registration under the 1933 Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within ninety (90) days of completion of the transaction for resale to
the public pursuant to the 1933 Act.
11
<PAGE> 12
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
(b) Remedies. Each Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive (to the extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of the Holders of at least a majority of the Registrable Stock
then outstanding affected by such amendment, modification, supplement, waiver or
departure.
(d) Successors and Assigns. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
Person other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(e) Governing Law. Agreement shall be governed by and construed in
accordance with the internal laws of the State of Nevada applicable to contracts
made and to be performed wholly within that state, without regard to the
conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Headings. The headings in this Agreement are used for convenience
of reference only and are not to be considered in construing or interpreting
this Agreement.
(h) Notices. Any notice required or permitted under this Agreement
shall be given in writing and shall be delivered in person or by telecopy or by
overnight courier guaranteeing no later than second business day delivery,
directed to (i) the Company at the address set forth below its signature hereof
or (ii) a Holder at the address of the Administrator set forth below its
signature hereof. Any party may change its address for notice by giving ten (10)
days advance written notice to the other parties. Every notice or other
communication hereunder shall be deemed to have been duly given or served on the
date on
12
<PAGE> 13
which personally delivered, or on the date actually received, if sent by
telecopy or overnight courier service, with receipt acknowledged.
(i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(k) Enforceability. This Agreement shall remain in full force and
effect notwithstanding any breach or purported breach of, or relating to, the
Placement Agreement.
(1) Recitals. The recitals are hereby incorporated in the Agreement as
if fully set forth herein.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
VENTURI TECHNOLOGY ENTERPRISES,
INC.
By:/s/ Gaylord Karren
--------------------------------
GAYLORD KARREN, Chairman and CEO
1327 N. State Street
Orem, Utah 84057
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
EQUITY SERVICES, LTD.
By:/s/ Lynn Turnquest
--------------------------------
LYNN TURNQUEST, Director
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
14
<PAGE> 1
Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 31st day of December, 1997 by and between VENTURI
TECHNOLOGY ENTERPRISES, INC., a Nevada corporation (the "Company") and
ENTREPRENEURIAL INVESTORS, LTD., a Bahamas company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring Two Hundred Thousand (200,000)
shares (the "Shares") of the Company's Series B 6% Cumulative Convertible
Preferred Stock, stated value $10.00 per share, (the "Series B Preferred Stock")
pursuant to that certain Investor Subscription Agreement by and between the
Company and the Shareholder of even date herewith (the "Investor Agreement");
and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the shares of the common stock of the Company,
par value $0.001 per share (the "Common Stock") issuable upon conversion of the
Shares and the Shareholder desires to obtain such registration rights, subject
to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions and References. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) any shares of Common Stock issued or issuable
upon the conversion of the Shares, (ii) any shares of Common Stock
issued by way of a stock split, reorganization, merger or
consolidation, and (iii) any Common Stock issued as a dividend on the
Shares. For purposes of this Agreement, any Registrable Stock shall
cease to be Registrable Stock when (v) a registration statement
covering such Registrable Stock has been declared effective and such
Registrable Stock has been disposed of pursuant to such effective
registration statement, (w) such Registrable Stock is sold pursuant to
Rule 144 (or any similar provision then in force)
<PAGE> 2
under the 1933 Act (x) such Registrable Stock is eligible to be sold
pursuant to Rule 144(k) under the 1933 Act, (y) such Registrable Stock
has been otherwise transferred, no stop transfer order affecting such
stock is in effect and the Company has delivered new certificates or
other evidences of ownership for such Registrable Stock not bearing any
legend indicating that such shares have not been registered under the
1933 Act, or (z) such Registrable Stock is sold by a person in a
transaction in which the rights under the provisions of this Agreement
are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, provided that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of 1933,
as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with a Holder, or
the spouse or children (or a trust exclusively for the benefit of the
spouse and/or children) of a Holder, or, in the case of a Holder that
is a partnership, its partners.
(g) The term "Person" shall mean an individual, corporation,
partnership, trust, limited liability company, unincorporated
organization or association or other entity, including any governmental
entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate at least a majority of the Registrable
Stock.
(i) References in this Agreement to any rules, regulations or
forms promulgated by the Commission shall include rules, regulations
and forms succeeding to the functions thereof, whether or not bearing
the same designation.
2. Demand Registration.
(a) Commencing December 31, 1997, any Requesting Holders may
make a written request to the Company (specifying that it is being made
pursuant to this Section 2) that the Company file a registration
statement under the 1933 Act (or a similar document pursuant to any
other statute then in effect corresponding to the 1933 Act) covering
the registration of Registrable Stock. In such event, the Company shall
(x) within ten (10) days thereafter notify in writing all other Holders
of Registrable Stock of such request, and (y) use its best efforts to
cause to be registered under the 1933 Act all Registrable Stock that
the Requesting Holders and such other Holders have, within forty-five
(45) days after the Company has given such notice, requested be
registered.
REGISTRATION RIGHTS AGREEMENT Page 2
<PAGE> 3
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2.(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2.(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to distribute
Registrable Stock through such underwritten offering shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved by
the Company, which approval shall not be unreasonably withheld;
provided, that all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
shall be conditions precedent to the obligations of such Holders; and
provided further, that no Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2 to
the contrary, if the managing underwriter of an underwritten offering
of the Registrable Stock requested to be registered pursuant to this
Section 2 advises the Requesting Holders in writing that in its opinion
marketing factors require a limitation of the number of shares to be
underwritten, the Requesting Holders shall so advise all Holders of
Registrable Stock that would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Stock that may be included in
such underwritten offering shall be allocated among all such Holders,
including the Requesting Holders, in proportion (as nearly as
practicable) to the amount of Registrable Stock requested to be
included in such registration by each Holder at the time of filing the
registration statement; provided, that in the event of such limitation
of the number of shares of Registrable Stock to be underwritten, the
Holders shall be entitled to an additional demand registration pursuant
to this Section 2. If any Holder of Registrable Stock disapproves of
the terms of the underwriting, such Holder may elect to withdraw by
written notice to the Company, the managing underwriter and the
Requesting Holders. The securities so withdrawn shall also be withdrawn
from registration.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration
pursuant to this Section 2 during the period starting with the
fourteenth (14th) day immediately preceding the date of an anticipated
filing by the Company of, and ending on a date ninety (90) days
following the effective date of, a registration statement pertaining to
a public offering of securities for the
REGISTRATION RIGHTS AGREEMENT Page 3
<PAGE> 4
account of the Company; provided, that the Company shall actively
employ in good faith all reasonable efforts to cause such registration
statement to become effective; and provided further, that the Company's
estimate of the date of filing such registration statement shall be
made in good faith.
(e) The Company shall be obligated to effect and pay for a
total of only one (1) registration pursuant to this Section 2, unless
increased pursuant to Section 2.(c) hereof; provided, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2.(e), unless (i) it
has been declared effective by the Commission, (ii) if it is a shelf
registration, it has remained effective for the period set forth in
Section 3.(b), (iii) the offering of Registrable Stock pursuant to such
registration is not subject to any stop order, injunction or other
order or requirement of the Commission (other than any such action
prompted by any act or omission of the Holders), and (iv) no limitation
of the number of shares of Registrable Stock to be underwritten has
been required pursuant to Section 2.(c) hereof.
3. Obligations of the Company. Whenever required under Section 2 to use
its best efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in accordance
with the intended method of distribution thereof, and use its best
efforts to cause such registration statement to become effective as
promptly as practicable thereafter; provided that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company will (i) furnish to one (1) counsel selected by
the Requesting Holders copies of all such documents proposed to be
filed, and (ii) notify each such Holder of any stop order issued or
threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for such period of time as would satisfy the
holding period requirements of Rule 144(k) promulgated by the
Commission with respect to the Shares or such shorter period which will
terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the expiration of the forty
(40) or ninety (90) day period referred to in Section 4(3) of the 1933
Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period in
REGISTRATION RIGHTS AGREEMENT Page 4
<PAGE> 5
accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each Holder and any underwriter of Registrable
Stock to be included in a registration statement copies of such
registration statement as filed and each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Stock
owned by such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdictions of the Registrable Stock owned by
such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.(d) hereof,
(ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock and
any underwriter thereof, at any time when a prospectus relating thereto
is required to be delivered under the 1933 Act (even if such time is
after the period referred to in Section 3.(b)), of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances being made
not misleading, and prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Stock, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of
the circumstances being made not misleading;
(g) make available for inspection by any selling Holder, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector, as shall
REGISTRATION RIGHTS AGREEMENT Page 5
<PAGE> 6
be reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement. Records
or other information which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of
such Records or other information is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records or other information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each
selling Holder shall, upon learning that disclosure of such Records or
other information is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the Company's expense,
to undertake appropriate action to prevent disclosure of the Records or
other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on the
date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on the date
that the registration statement with respect to such shares of
Registrable Stock becomes effective, (1) a signed opinion, dated such
date, of the legal counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders as to such matters as such underwriters or the
Requesting Holders, as the case may be, may reasonably request and as
would be customary in such a transaction; and (2) a letter dated such
date, from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and if such Registrable Stock is
not being sold through underwriters, then to the Requesting Holders
and, if such accountants refuse to deliver such letter to such Holder,
then to the Company (i) stating that they are independent certified
public accountants within the meaning of the 1933 Act and that, in the
opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting
requirements of the 1933 Act, and (ii) covering such other financial
matters (including information as to the period ending not more than
five (5) business days prior to the date of such letter) with respect
to the registration in respect of which such letter is being given as
the Requesting Holders may reasonably request and as would be customary
in such a transaction;
(i) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of at
least twelve (12)
REGISTRATION RIGHTS AGREEMENT Page 6
<PAGE> 7
months beginning with the first full month after the effective date of
such registration statement, which earnings statements shall satisfy
the provisions of Section 11(a) of the 1933 Act; and
(k) use its best efforts to cause all such Registrable Stock
to be listed on the Nasdaq SmallCap Market and/or any other securities
exchange on which similar securities issued by the Company are then
listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3.(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Stock pursuant to
the registration statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.(f) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 3.(f) hereof.
4. Incidental Registration. Commencing immediately after the date of
Closing (as defined in the Investor Agreement), if the Company determines that
it shall file a registration statement under the 1933 Act (other than a
registration statement on a Form S-4 or S-8 or filed in connection with an
exchange offer or an offering of securities solely to the Company's existing
stockholders) on any form that would also permit the registration of the
Registrable Stock and such filing is to be on its behalf and/or on behalf of
selling holders of its securities for the general registration of its common
stock to be sold for cash, at each such time the Company shall promptly give
each Holder written notice of such determination setting forth the date on which
the Company proposes to file such registration statement, which date shall be no
earlier than thirty (30) days from the date of such notice, and advising each
Holder of its right to have Registrable Stock included in such registration.
Upon the written request of any Holder received by the Company no later than
twenty (20) days after the date of the Company's notice, the Company shall use
its best efforts to cause to be registered under the 1933 Act all of the
Registrable Stock that each such Holder has so requested to be registered. If,
in the written opinion of the managing underwriter or underwriters (or, in the
case of a non-underwritten offering, in the written opinion of the placement
agent, or if there is none, the Company), the total amount of such securities to
be so registered, including such
REGISTRATION RIGHTS AGREEMENT Page 7
<PAGE> 8
Registrable Stock, will exceed the maximum amount of the Company's securities
which can be marketed (i) at a price reasonably related to the then current
market value of such securities, or (ii) without otherwise materially and
adversely affecting the entire offering, then the amount of Registrable Stock to
be offered for the accounts of Holders shall be reduced pro rata to the extent
necessary to reduce the total amount of securities to be included in such
offering to the recommended amount; provided, that if securities are being
offered for the account of other Persons as well as the Company, such reduction
shall not represent a greater fraction of the number of securities intended to
be offered by Holders than the fraction of similar reductions imposed on such
other Persons other than the Company over the amount of securities they intended
to offer.
5. Holdback Agreement-- Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law, each
Holder whose Registrable Stock is included in a registration statement
agrees not to effect any public sale or distribution of the issue being
registered or a similar security of the Company, or any securities
convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 under the 1933 Act, during the
fourteen (14) days prior to, and during the ninety (90) day period
beginning on, the effective date of such registration statement (except
as part of the registration), if and to the extent requested by the
Company in the case of a nonunderwritten public offering or if and to
the extent requested by the managing underwriter or underwriters in the
case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company and Others. The
Company agrees (i) not to effect any public sale or distribution of any
securities similar to those being registered, or any securities
convertible into or exchangeable or exercisable for such securities,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of any registration statement
in which Holders are participating (except as part of such
registration), if and to the extent requested by the Holders in the
case of a non-underwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the case of an
underwritten public offering; and (ii) that any agreement entered into
after the date of this Agreement pursuant to which the Company issues
or agrees to issue any securities convertible into or exchangeable or
exercisable for such securities (other than pursuant to an effective
registration statement) shall contain a provision under which holders
of such securities agree not to effect any public sale or distribution
of any such securities during the periods described in (i) above, in
each case including a sale pursuant to Rule 144 under the 1933 Act.
6. Expenses of Registration. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger
REGISTRATION RIGHTS AGREEMENT Page 8
<PAGE> 9
and delivery expenses, all fees and expenses of complying with securities or
blue sky laws, fees and disbursements of counsel for the Company. The selling
Holders shall bear and pay the underwriting commissions and discounts applicable
to the Registrable Stock offered for their account in connection with any
registrations, filings and qualifications made pursuant to this Agreement.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such Holder
(within the meaning of the 1933 Act) against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged
untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein (in case of a
prospectus or preliminary prospectus, in the light of the circumstances
under which they were made) not misleading. The Company will also
indemnify any underwriters of the Registrable Stock, their officers and
directors and each Person who controls such underwriters (within the
meaning of the 1933 Act) to the same extent as provided above with
respect to the indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company (within
the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein (in the
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission
is contained in any information with respect to such Holder so
furnished in writing by such Holder. Notwithstanding the foregoing, the
liability of each such Holder under this Section 7.(b) shall be limited
to an amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability arises out
of or is based on willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the
REGISTRATION RIGHTS AGREEMENT Page 9
<PAGE> 10
reasonable judgment of such indemnified party, a conflict of interest
may exist between such indemnified party and the indemnifying party
with respect to such claim, permit the indemnifying party to assume the
defense of such claims with counsel reasonably satisfactory to such
indemnified party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent
will not be unreasonably withheld). Failure by such Person to provide
said notice to the indemnifying party shall itself not create liability
except to the extent of any injury caused thereby. No indemnifying
party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. If
the indemnifying party is not entitled to, or elects not to, assume the
defense of a claim, it will not be obligated to pay the fees and
expenses of more than one (1) counsel with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict
of interest may exist between such indemnified party and any other such
indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels.
(d) Contribution. If for any reason the indemnity provided for
in this Section 7 is unavailable to, or is insufficient to hold
harmless, an indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties; and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 7.(c), any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933
REGISTRATION RIGHTS AGREEMENT Page 10
<PAGE> 11
Act) shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
If indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 7.(a) and 7.(b) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 7.
8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitations of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
10. Transfer of Registration Rights. The registration rights of any
Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this Section
10, no transfer of Registrable Stock shall cause such Registrable Stock to lose
such status.
11. Mergers, Etc. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Stock" shall be deemed to be references to
the securities which
REGISTRATION RIGHTS AGREEMENT Page 11
<PAGE> 12
the Holders would be entitled to receive in exchange for Registrable Stock under
any such merger, consolidation or reorganization; provided, however, that the
provisions of this Section 11 shall not apply in the event of any merger,
consolidation or reorganization in which the company is not the surviving
corporation if each Holder is entitled to receive in exchange for its
Registrable Stock consideration consisting solely of (i) cash, (ii) securities
of the acquiring corporation which may be immediately sold to the public without
registration under the 1933 Act, or (iii) securities of the acquiring
corporation which the acquiring corporation has agreed to register within ninety
(90) days of completion of the transaction for resale to the public pursuant to
the 1933 Act.
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders in this Agreement.
(b) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement.
The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive (to the extent
permitted by law) the defense in any action for specific performance
that a remedy of law would be adequate.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of the Holders of at least a
majority of the Registrable Stock then outstanding affected by such
amendment, modification, supplement, waiver or departure.
(d) Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Nevada
applicable to contracts made and to be performed wholly within that
state, without regard to the conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
REGISTRATION RIGHTS AGREEMENT Page 12
<PAGE> 13
(g) Headings. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in person or
by telecopy or by overnight courier guaranteeing no later than second
business day delivery, directed to (i) the Company at the address set
forth below its signature hereof or (ii) a Holder at the address of the
Administrator set forth below its signature hereof. Any party may
change its address for notice by giving ten (10) days advance written
notice to the other parties. Every notice or other communication
hereunder shall be deemed to have been duly given or served on the date
on which personally delivered, or on the date actually received, if
sent by telecopy or overnight courier service, with receipt
acknowledged.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions
contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Enforceability. This Agreement shall remain in full force
and effect notwithstanding any breach or purported breach of, or
relating to, the Investor Agreement.
(l) Recitals. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
[REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
REGISTRATION RIGHTS AGREEMENT Page 13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
VENTURI TECHNOLOGY ENTERPRISES,
INC.
By: /s/ Gaylord Karren
---------------------------------
GAYLORD KARREN, Chairman and CEO
1327 N. State Street
Orem, Utah 84057
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ Robert E. Cordes
---------------------------------
ROBERT E. CORDES, Director
Citibank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
REGISTRATION RIGHTS AGREEMENT Page 14
<PAGE> 1
Exhibit 4.7
LOCK UP AGREEMENT
December 23, 1997
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, BAHAMAS
Re: VENTURI TECHNOLOGY ENTERPRISES, INC., a Nevada corporation
Gentlemen:
I am a beneficial owner of securities of Venturi Technology
Enterprises, Inc., a Nevada corporation (the "Company"). I understand that you
propose to make a private placement of securities of the Company. I acknowledge
that such action by you will be of material benefit to the Company and the
undersigned as a beneficial owner of the Company's securities.
In consideration of the foregoing, and in order to induce you to act as
set forth above, I confirm my agreement that I will not, without your prior
written approval, offer for sale, sell, pledge, hypothecate or otherwise dispose
of, directly or indirectly, any of the shares of the Company's common stock
which I may own legally or beneficially as set forth on Exhibit "A" attached
hereto and made a part hereof ("Shares"), in any manner whatsoever whether
pursuant to SEC Rule 144 or otherwise, prior to May 31, 1999; however, the
Shares held pursuant to this agreement shall be released herefrom at a rate of
One Thousand (1,000) Shares per week for so long as the closing bid price of the
Shares shall have averaged in excess of Ten Dollars ($10.00) per share (subject
to adjustment in the event of any reverse stock splits or other similar events),
on trading volume of at least fifteen thousand (15,000) shares per day, for the
previous thirty (30) trading days (excluding any trading halts).
In any event, the restriction contained in this letter become null and
void effective May 31, 1999, and all shares held pursuant to this Lock-Up
Agreement shall be released.
I further understand that the Company will execute a placement
agreement with Equity Services, Ltd. concerning the proposed private placement
and that such agreement will provide that the Company will take such steps as
may be necessary to enforce the foregoing provisions and restrict the sale or
transfer of the Shares as provided herein including, but not limited to,
notification to the Company's transfer agent regarding any such restrictions;
and I hereby agree to and authorize any such actions and acknowledge that the
Company and you are relying upon this agreement in taking any such actions.
<PAGE> 2
Very truly yours,
/s/ Gaylord Karren
-------------------------------------
(Shareholder)
<PAGE> 3
EXHIBIT "A" TO LOCK-UP AGREEMENT
<TABLE>
<CAPTION>
Number of Shares of Common Stock Owned or
Shareholder Beneficially Owned
- ----------- -----------------------------------------
<S> <C>
Gaylord Karren 926,250
John Hopkins 926,250
Merril Littlewood 2,500
</TABLE>
<PAGE> 4
LOCK UP AGREEMENT
December 23, 1997
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, BAHAMAS
Re: VENTURI TECHNOLOGY ENTERPRISES, INC., a Nevada corporation
Gentlemen:
I am a beneficial owner of securities of Venturi Technology
Enterprises, Inc., a Nevada corporation (the "Company"). I understand that you
propose to make a private placement of securities of the Company. I acknowledge
that such action by you will be of material benefit to the Company and the
undersigned as a beneficial owner of the Company's securities.
In consideration of the foregoing, and in order to induce you to act as
set forth above, I confirm my agreement that I will not, without your prior
written approval, offer for sale, sell, pledge, hypothecate or otherwise dispose
of, directly or indirectly, any of the shares of the Company's common stock
which I may own legally or beneficially as set forth on Exhibit "A" attached
hereto and made a part hereof ("Shares"), in any manner whatsoever whether
pursuant to SEC Rule 144 or otherwise, prior to May 31, 1999; however, the
Shares held pursuant to this agreement shall be released herefrom at a rate of
One Thousand (1,000) Shares per week for so long as the closing bid price of the
Shares shall have averaged in excess of Ten Dollars ($10.00) per share (subject
to adjustment in the event of any reverse stock splits or other similar events),
on trading volume of at least fifteen thousand (15,000) shares per day, for the
previous thirty (30) trading days (excluding any trading halts).
In any event, the restriction contained in this letter become null and
void effective May 31, 1999, and all shares held pursuant to this Lock-Up
Agreement shall be released.
I further understand that the Company will execute a placement
agreement with Equity Services, Ltd. concerning the proposed private placement
and that such agreement will provide that the Company will take such steps as
may be necessary to enforce the foregoing provisions and restrict the sale or
transfer of the Shares as provided herein including, but not limited to,
notification to the Company's transfer agent regarding any such restrictions;
and I hereby agree to and authorize any such actions and acknowledge that the
Company and you are relying upon this agreement in taking any such actions.
<PAGE> 5
Very truly yours,
/s/ John Hopkins
-------------------------------------
(Shareholder)
<PAGE> 6
EXHIBIT "A" TO LOCK-UP AGREEMENT
<TABLE>
<CAPTION>
Number of Shares of Common Stock Owned or
Shareholder Beneficially Owned
- ----------- -----------------------------------------
<S> <C>
Gaylord Karren 926,250
John Hopkins 926,250
Merril Littlewood 2,500
</TABLE>
<PAGE> 7
LOCK UP AGREEMENT
December 23, 1997
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, BAHAMAS
Re: VENTURI TECHNOLOGY ENTERPRISES, INC., a Nevada corporation
Gentlemen:
I am a beneficial owner of securities of Venturi Technology
Enterprises, Inc., a Nevada corporation (the "Company"). I understand that you
propose to make a private placement of securities of the Company. I acknowledge
that such action by you will be of material benefit to the Company and the
undersigned as a beneficial owner of the Company's securities.
In consideration of the foregoing, and in order to induce you to act as
set forth above, I confirm my agreement that I will not, without your prior
written approval, offer for sale, sell, pledge, hypothecate or otherwise dispose
of, directly or indirectly, any of the shares of the Company's common stock
which I may own legally or beneficially as set forth on Exhibit "A" attached
hereto and made a part hereof ("Shares"), in any manner whatsoever whether
pursuant to SEC Rule 144 or otherwise, prior to May 31, 1999; however, the
Shares held pursuant to this agreement shall be released herefrom at a rate of
One Thousand (1,000) Shares per week for so long as the closing bid price of the
Shares shall have averaged in excess of Ten Dollars ($10.00) per share (subject
to adjustment in the event of any reverse stock splits or other similar events),
on trading volume of at least fifteen thousand (15,000) shares per day, for the
previous thirty (30) trading days (excluding any trading halts).
In any event, the restriction contained in this letter become null and.
void effective May 31, 1999, and all shares held pursuant to this Lock-Up
Agreement shall be released.
I further understand that the Company will execute a placement
agreement with Equity Services, Ltd. concerning the proposed private placement
and that such agreement will provide that the Company will take such steps as
may be necessary to enforce the foregoing provisions and restrict the sale or
transfer of the Shares as provided herein including, but not limited to,
notification to the Company's transfer agent regarding any such restrictions;
and I hereby agree to and authorize any such actions and acknowledge that the
Company and you are relying upon this agreement in taking any such actions.
<PAGE> 8
Very truly yours,
/s/ M. L. Littlewood
-------------------------------------
(Shareholder)
<PAGE> 9
EXHIBIT "A" TO LOCK-UP AGREEMENT
<TABLE>
<CAPTION>
Number of Shares of Common Stock Owned or
Shareholder Beneficially Owned
- ----------- -----------------------------------------
<S> <C>
Gaylord Karren 926,250
John Hopkins 926,250
Merril Littlewood 2,500
</TABLE>
<PAGE> 1
EXHIBIT 4.8
LOCK UP AGREEMENT
July 28, 1998
Venturi Technologies, Inc.
1327 North State Street
Orem, Utah 84057
Attention: Gaylord Karren, Chairman
and Chief Executive Officer
Gentlemen:
Invest Linc Emerging Growth Equity Fund I, L.L.C., a Nevada limited
liability company and successor-in-interest to CDL Emerging Growth Equity Fund
I, L.L.C., a Nevada limited liability company (the "Fund"), is the holder of
record of 372,862 shares of restricted Series C 6% Cumulative Convertible
Non-Voting Preferred Stock (the "Series C Preferred Stock") issued by Venturi
Technologies, Inc., a Nevada corporation (the "Company"). In connection with the
filing, on or about the date hereof, by the Company of a Registration Statement
on Form SB-2 with the Securities and Exchange Commission ("SEC") for the purpose
of registering shares of the Company's common stock, the Fund has exercised its
option arising under that certain Stock Purchase Agreement dated as of April 10,
1998 between the Company, the Fund, CDL Capital Corp., a Nevada corporation, and
Gaylord Karren and John Hopkins, to convert, as of the date hereof, the Series C
Preferred Stock into the same number of shares of the Company's common stock. As
you know, the Fund has demanded that the 372,862 shares of the Company's common
stock that the Fund will receive upon conversion of the Series C Preferred Stock
(the "Common Shares") be registered as part of the current registration.
In connection with the foregoing, this letter will confirm the Fund's
agreement that it will not, without the Company's prior written approval, offer
for sale, sell, pledge, hypothecate or otherwise dispose of, directly or
indirectly, any of the Common Shares, whether pursuant to SEC Rule 144 or
otherwise, prior to May 31, 1999; provided however, that the Common Shares shall
be released from such restriction on transfer at the rate of One Thousand
(1,000) Common Shares per week for so long as the average closing bid price of
the Common Shares exceeds Ten Dollars ($10.00) per Common Share (subject to
adjustment in the event of any reverse stock splits or other similar events), on
trading volume of at least fifteen thousand (15,000) Common Shares per day, for
the previous thirty (30) trading days (excluding any trading halts).
<PAGE> 2
This Agreement shall become null and void effective May 31, 1999, and
all Common Shares subject to the restriction on transfer arising hereunder then
shall be released in full from such restriction.
Very truly yours,
/s/ Kirby D. Cochran
--------------------------------------
Invest Linc Emerging Growth
Equity Fund I, L.L.C., a Nevada limited
liability company, by Kirby D. Cochran,
President
2
<PAGE> 1
EXHIBIT 4.9
Counterpart No. 2
MASTER EQUIPMENT FINANCING AGREEMENT
THIS MASTER EQUIPMENT FINANCING AGREEMENT (the "Agreement") is dated as
of the 18th day of June, 1996 by and between SENTRY FINANCIAL CORPORATION, a
Utah corporation ("Sentry"), having its principal office and place of business
at One Utah Center, 201 South Main Street, Suite 1400, Salt Lake City, Utah
84111-2215 and VENTURI TECHNOLOGIES, INC., a Texas corporation ("Customer"),
having its principal office and place of business at 3629 Conflans, Irving,
Texas 75061.
IN CONSIDERATION of the mutual agreements set forth hereinafter and the
payment of rent or loan payments as provided for herein, the parties agree as
follows:
1. PROPERTY FINANCED. This contract is a Master Equipment Financing
Agreement which contemplates that Sentry, from time to time, will (i) lease
equipment to Customer, and/or (ii) extend loans to Customer secured by
equipment. The terms of each Equipment Schedule hereto will indicate the nature
of the transaction, i.e., lease or loan, and will be subject to any and all
applicable conditions and provisions set forth herein as may from time to time
be amended. Each Equipment Schedule shall be in the form acceptable to Sentry,
shall incorporate therein all of the terms and conditions of this Agreement and
shall contain such additional terms and conditions as Sentry and Customer shall
agree upon. Each Equipment Schedule is enforceable according to the terms and
conditions contained therein. In the event of a conflict between the language of
this Agreement and any Equipment Schedule hereto, the language of the Equipment
Schedule shall prevail with respect to that Equipment Schedule.
Sentry, by its acceptance hereof at its home office, agrees to extend
equipment financing to Customer, by either lease or loan (as set forth on the
applicable Equipment Schedule), and Customer agrees to (i) lease from Sentry, in
accordance with the terms and conditions herein, the equipment and features
together with all replacements, parts, repairs, additions, attachments and
accessories incorporated therein (collectively called the "Equipment" and
individually called a "Financed Item") described in each executed Equipment
Schedule which shall be made a part hereof; and/or (ii) borrow money from Sentry
in accordance with the terms and conditions herein, the repayment of which will
be secured by the Equipment. If the structure of the transaction is a lease,
Customer shall have no right, title or interest in the Equipment, except as a
lessee as expressly set forth herein. If the structure of the transaction is a
loan, Customer shall (i) grant to Sentry a first priority security interest in
the Equipment, and (ii) keep such Equipment free and clear of all other liens
and encumbrances. Sentry shall have no obligation hereunder until the execution
and delivery of an Equipment Schedule by Sentry and Customer.
2. TERM, PAYMENTS AND TERMINATION. The term of this Agreement shall
commence on the date set forth above and shall continue thereafter so long as
any Equipment Schedule entered into pursuant to this Agreement remains in
effect.
The Initial Term, the Loan Amount (if the transaction is structured as
a loan), the interest rate (if the transaction is structured as a loan), and the
Periodic Payment payable with respect to each Financed Item, together with other
transaction specific terms and conditions, shall be as set forth in and as
stated in the respective Equipment Schedule(s). Customer or Sentry may terminate
any Equipment Schedule effective at the expiration of the Initial Term or any
renewal term thereof, by giving the other party 180 days prior written notice.
Where the transaction is structured as a lease: (i) if notice of termination is
not given at least 180 days prior to such expiration, then the Initial Term
shall be automatically extended for an additional period of six months on the
same terms provided for during the Initial Term. No notice of termination may be
revoked without prior written consent of the other party; and (ii) if, upon the
termination of the applicable Equipment Schedule as to any Financed Item,
Customer fails or refuses to return and deliver possession of such Financed Item
to Sentry within three business days after the expiration of the term of the
Equipment Schedule, in additional to all other rights and remedies available to
Sentry, Customer shall be liable to Sentry for all Periodic Payments on such
Financed Item until its return and direct damages Sentry may suffer by reason of
being unable to deliver such Financed Item to another party. Unless otherwise
specifically agreed in writing by Sentry, Customer shall have no right to
prepay, in whole or in part, any amounts financed hereunder.
3. ACCEPTANCE, WARRANTIES, LIMITATION OF LIABILITY. Customer represents
and agrees that, as of the date each Financed Item is accepted hereunder (the
"ACCEPTANCE DATE"), each Financed Item is of a size, design, capacity and
manufacture selected by Customer and that Customer has inspected such Financed
Item, found it to be in good order, and unconditionally accepted such Financed
Item, without prejudice, however, to any right or remedy Customer may have
against the manufacturer or supplier thereof. On the Acceptance Date, Customer
will execute and deliver a Certificate of Acceptance (in a form acceptable to
Sentry) with respect to each Financed Item which certificate of acceptance will
be conclusive evidence of the foregoing. At Sentry's option, in lieu of a
separate Certificate of Acceptance, Sentry may incorporate the language that
would otherwise exist in a Certificate of Acceptance into the Equipment
Schedule, in which case it will have the same effect as if set forth in a
separate Certificate of Acceptance. SENTRY SHALL HAVE NO LIABILITY TO CUSTOMER
FOR ANY CLAIM, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY,
INDIRECTLY, INCIDENTLY OR CONSEQUENTIALLY BY THE EQUIPMENT, BY ANY INADEQUACY
<PAGE> 2
Counterpart No. 2
THEREOF OR DEFICIENCY OR DEFECT THEREIN, BY ANY INCIDENT WHATSOEVER IN
CONNECTION THEREWITH, ARISING IN STRICT LIABILITY, NEGLIGENCE OR OTHERWISE, OR
IN ANY WAY RELATED TO OR ARISING OUT OF THIS AGREEMENT. SENTRY MAKES NO EXPRESS
OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING THOSE OF MERCHANTABILITY,
DURABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
EQUIPMENT AND EXPRESSLY DISCLAIMS THE SAME. Notwithstanding the foregoing,
Customer will be entitled to the benefit of any applicable manufacturer's
warranties, and, to the extent assignable by Sentry, such warranties are hereby
assigned by Sentry for the benefit at Customer, and Customer shall take all
reasonable action to enforce such warranties where available to Customer.
4. ASSIGNMENT, OBLIGATION TO PAY PERIODIC PAYMENTS UNCONDITIONAL.
Sentry may (a) assign or sell all or a portion of its right, title and interest
in and to the Equipment, this Agreement, and/or any Equipment Schedule, and/or
(b) in the event the transaction is structured as a lease, grant a security
interest in the Equipment, any Financed Item, this Agreement, and/or any
Equipment Schedule; to one or more lenders or equity sources (individually
"Assignee," collectively the "Assignees"). Customer hereby (i) consents to such
assignments and/or grants, (ii) agrees to promptly execute and deliver, from
time to time and at no cost or expense to Sentry, such further acknowledgments,
agreements and other instruments as may be reasonably requested by Sentry or any
Assignee to effect such assignments and/or grants, and (iii) agrees to comply
fully with the terms of any such assignments and/or grants, provided that such
assignments and/or grants shall not change the timing or amount of Customer's
remaining payment obligations hereunder nor materially change Customer's other
remaining rights and obligations hereunder. Customer agrees that Sentry may
assign or transfer this Agreement or Sentry's interest in the Equipment even if
said assignment or transfer could be deemed to materially affect the interest of
Customer. In the event of an assignment, all references herein to Sentry shall
include Assignee; provided, however, that Assignee shall not be obligated to
perform the obligations of Sentry hereunder unless Assignee expressly agrees to
do so in writing.
This Agreement is a "net" lease or loan, as the case may be, and
Customer agrees that its obligation to pay all Periodic Payments and other sums
payable hereunder (collectively, "Payments"), and the rights of Sentry and
Assignee in and to such Payments, are absolute and unconditional and are not
subject to any abatement, reduction, setoff, defense, counterclaim or recoupment
due or alleged to be due, to or by reason of, any past, present or future claims
which Customer may have against Sentry, Assignee, the manufacturer or seller of
the Equipment, or against any person for any reason whatsoever. Customer shall
have no right to assign any Equipment Schedule or to sublease the Equipment
without the express prior written consent of Sentry, which consent may be
granted or withheld in Sentry's sole discretion.
5. INSTALLATION, MAINTENANCE AND REPAIR. Customer has selected the
type, quantity and supplier of each item of Equipment, and in reliance thereon,
such Equipment has been or will be ordered by Sentry from such supplier, or
Sentry has accepted or will accept an assignment of an existing purchase order
therefor. Customer shall, at its expense, be responsible for the delivery,
installation, deinstallation, redelivery, maintenance and repair of the
Equipment by a party acceptable to Sentry. Sentry shall have no liability for
any delay in delivery or failure by the supplier to deliver any Equipment or to
till nay purchase order or meet the conditions thereof. Customer agrees, at all
times during the term of each Equipment Schedule, at its sole expense, to keep
the Equipment in good repair, condition and working order, and to furnish all
parts, mechanisms or devices which may be required in the course of so doing.
Customer will at all times during the term of each Equipment Schedule maintain
in force a maintenance agreement covering the Equipment with the manufacturer
thereof or such other party as may be reasonably acceptable to Sentry and, if
the transaction is structured as a lease, upon the surrender of the Equipment to
Sentry, Customer shall provide a letter from the manufacturer(s) of the
Equipment certifying that the Equipment is eligible for maintenance. Sentry or
Assignee will have the right, but not the obligation, to inspect the Equipment
during reasonable business hours.
If the transaction is structured as a lease, Customer shall permit
manufacturer access to the Equipment to install "no charge" engineering changes
in order to keep the Equipment at current engineering levels.
6. REPRESENTATIONS AND WARRANTIES. Customer represents and warrants for
the benefit of Sentry and Assignee, and if requested by Sentry will provide an
opinion of counsel and other supporting documents to the effect that, at the
time of execution of this Agreement and of each Equipment Schedule:
(a) Customer is a legal entity, duty organized, validly existing and in
good standing under the laws of the jurisdiction where the Equipment will be
located and has adequate power to enter into and perform this Agreement and each
Equipment Schedule executed hereunder; and Customer will keep in full force and
effect its existence and rights as a corporation under the laws of the
jurisdiction of its incorporation and will obtain and preserve its right to do
business as a corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Agreement
and each Equipment Schedule:
(b) This Agreement and each Equipment Schedule executed hereunder have
been duly authorized, executed and delivered by Customer and together constitute
a valid, legal and binding agreement of Customer, enforceable in accordance with
their terms;
2
<PAGE> 3
Counterpart No. 2
(c) The entering into and performance of this Agreement and each
Equipment Schedule executed hereunder will not violate any judgment, order, law
or regulation applicable to Customer or any provision of Customer's articles of
incorporation or bylaws or result in any breach of, or constitute a default
under, or result in the creation of any lien, charge, security interest or other
encumbrance upon any assets of Customer or on the Equipment (except as granted
under this Agreement) pursuant to any instrument to which Customer is a party or
by which it or its assets may be bound;
(d) There are no actions, suits or proceedings pending or, to the
knowledge of Customer, threatened, before any court, administrative agency,
arbitrator or governmental body which will, if determined adversely to Customer,
materially adversely affect its ability to perform its obligations under this
Agreement, or any Equipment Schedule executed hereunder or any related agreement
to which Customer is a party;
(e) Customer is not a tax exempt organization;
(f) Customer is not in material default under any loan or lease
agreement;
(g) Customer is not insolvent and will not be rendered insolvent by any
transaction contemplated by this Agreement or any Equipment Schedule. In
addition, if the transaction is structured as a loan, Customer represents and
warrants, for the benefit of Sentry and Assignee, that:
(h) Customer owns the Equipment free and clear of off liens, charges,
and other encumbrances, and that this Agreement constitutes a valid lien on the
Equipment; Customer will warrant and defend its title in and to the Equipment
against the claims and demands of all persons and will maintain the lien created
under this Agreement; and
(i) Customer will execute and deliver, from time to time, all such
supplements and amendments hereto or to an Equipment Schedule, and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action, as Sentry reasonably
requests and deems necessary or advisable to (1) maintain or preserve the lien
created under this Agreement or carry out more effectively the purposes hereof,
and/or (11) perfect, publish notice of, or protect the validity of this
Agreement or any Equipment Schedule.
7. RISK OF LOSS AND DAMAGE. (a) Customer agrees to bear the entire risk
of loss with respect to any damage, destruction, loss, theft, or governmental
taking of any Financed Item, whether partial or complete and whether or not
through any default or neglect of Customer. Except as provided in this Section
7, no such event shall relieve Customer of its obligation to pay Payments
hereunder.
(a) If any Financed Item is damaged, Customer must promptly notify
Sentry and within 60 days of such damage shall, at Customer's expense, cause
such repairs to be made as are necessary to return such Financed Item to its
previous condition. Customer shall then and only then, be entitled to receive
from Sentry or Assignee, as the case may be, any insurance proceeds received or
attributable to such damage.
(b) In the event that any Financed Item is destroyed, damaged beyond
repair, lost, stolen, or taken by government action or a stated period extending
beyond the term of the applicable Equipment Schedule(s) (an "Event of Loss"),
Customer must promptly notify Sentry and Assignee and pay to Sentry or Assignee,
as the case may be, on the next Periodic Payment Date following the Event of
Loss, an amount equal to the Casualty Value of such Financed Item calculated
pursuant to the Casualty Value Table in effect on the date of the Event of Loss
and all Payments accrued on such item up to the date of payment. Upon payment of
such amounts, Customer's obligation to pay any further Periodic Payments will
cease with respect to that Financed Item (but not with respect to any remaining
Equipment) and Customer will be entitled to receive any insurance proceeds or
other recovery received by Sentry or Assignee in connection with such Event of
Loss.
(c) In the event of a governmental taking of a Financed Item for an
indefinite period or for a stated period which does not extend beyond the term
of the applicable Equipment Schedule(s), all obligations of Customer with
respect to such Financed Item (including payment of Payments) will continue. So
long as Customer is not in default hereunder, Sentry will pay to Customer all
sums received by Sentry by reason of such governmental taking up to the amount
paid by Customer during such period.
8. INSURANCE. Customer, at its sole expense, shall insure the Equipment
against all risks in such amounts (but not less then the Casualty Value) upon
terms and with carriers reasonably acceptable to Sentry. Such insurance policies
shall insure against, among other exposures, damage or destruction of the
Equipment, bodily and personal injury, property damage liabilities and other
risks customarily and reasonably insured against by Customer on Equipment owned
by Customer. All such insurance must name Sentry and Assignee as additional
insureds for all liability insurance and sole loss payee of all casualty
insurance, and must provide that such insurance may not be canceled or altered
without at least 30 days prior written notice to Sentry and Assignee. Upon
Sentry's and Assignee's prior written consent, Customer may act as a
self-insurer in amounts acceptable to Sentry and Assignee.
9. INDEMNITY. Customer agrees to indemnify, hold harmless and defend,
Sentry and Assignee from and against any and all claims, demands, actions,
suits, proceedings, costs, expenses, damages and liabilities, at law or in
equity, (including reasonable outside counsel fees, allocated costs of internal
counsel and disbursements for
3
<PAGE> 4
Counterpart No. 2
both), arising out of, connected with, or resulting from, this Agreement, any
Equipment Schedule executed hereunder, or the Equipment, including, without
limitation: (i) the manufacture, selection, purchase, delivery, possession,
condition, use, operation or return thereof; and (ii) the enforcement of this
Agreement, any Equipment Schedule, and any other documents delivered thereunder,
including any out-of-court workout or in any bankruptcy case. Any obligations
under this paragraph arising prior to the expiration of this Agreement or the
Initial Term (or any renewal term) of any Equipment Schedule, shall survive the
expiration or other termination of this Agreement or the applicable Equipment
Schedule.
10. LIENS AND TAXES. Customer will, at its sole expense, keep the
Equipment free and clear of all levies, liens and encumbrances. Customer shall
not assign or otherwise encumber this Agreement, any Equipment Schedule or any
of its rights hereunder without the prior written consent of Sentry. Customer
will declare and pay to the appropriate governmental authorities when due all
license fees, registration fees, assessments, charges and taxes, whether
municipal, state or federal, including, but not limited to, sales, use, excise
and property taxes, and penalties and interest with respect thereto, excluding,
however, any taxes measured solely by Sentry's net income. Customer shall
provide evidence of any payment hereunder upon request of Sentry. Any
obligations under this paragraph arising prior to the expiration of the Initial
Term (or any renewal term) shall survive the expiration or other termination of
the applicable Equipment Schedule.
11. CUSTOMER'S FAILURE TO PERFORM. Should Customer fail to make any
payment or fail to do any act required herein, Sentry has the right, but not the
obligation and without releasing Customer from any obligation hereunder to make
or do the same, to pay, purchase, contest or compromise any encumbrance, charge
or lien which, in the judgment of Sentry, appears to affect the Equipment and,
in exercising any such rights, incur any liability and expend whatever amount in
Sentry's absolute discretion Sentry may deem necessary therefor. All sums so
incurred or expended by Sentry shall be, without demand, immediately due and
payable by Customer, shall be considered Payments hereunder, and will bear
interest at the lesser of 2% per month or the highest interest rate legally
permissible ("Late Payment Rate").
12. EQUIPMENT IS PERSONAL PROPERTY; LOCATION OF EQUIPMENT. Customer
covenants and agrees that the Equipment is, and will at all times be and remain,
personal property and, in the case of a transaction structured as a lease, owned
by Sentry (or Assignee). If requested by Sentry, Customer will obtain, prior to
delivery of any Financed Item, a certificate in a form satisfactory to Sentry
from all parties with an interest in the premises wherein the Equipment may be
located, waiving any claim with respect to the Equipment.
Customer will not move any Financed Item nor permit any Financed Item
to be moved from the address set forth in the applicable Equipment Schedule
without Sentry's consent, which consent will not be unreasonably withhold;
provided, however, that in no event will any Financed Item be moved to a
location outside the United States of America.
13. DESIGNATION OF OWNERSHIP. If at any time during the term hereof
Customer is supplied with labels, plates or other markings stating that the
Equipment is owned by Sentry or Assignee, or is subject to any security interest
of Sentry or Assignee, Customer agrees to affix and keep the same prominently
displayed on the Equipment. Customer agrees to execute and file Uniform
Commercial Code financing statements and any and all other instruments necessary
to perfect Sentry's or Assignee's interest in this Agreement, Equipment
Schedule(s), the Payments or the Equipment. Sentry may file a copy of this
Agreement and appropriate Equipment Schedule(s) as a financing statement.
Customer agrees to pay all reasonable costs and expenses incurred by Sentry
including, without limitation, attorneys' fees and UCC search fees, in
connection with the actions taken by Sentry to complete each Equipment Schedule.
14. USE. Customer shall use the Equipment in a careful and proper
manner in conformance with manufacturer's specifications and shall comply with,
and conform to, all federal, state, municipal and other laws, ordinances and
regulations in any way relating to the possession, use or maintenance of the
Equipment.
15. SURRENDER OF EQUIPMENT. If the transaction is structured as a
lease, upon the expiration or earlier termination of each Equipment Schedule
with respect to any Financed Item, Customer shall, unless Customer has paid
Sentry in cash the Casualty Value of the Equipment pursuant to Section 7, return
the same to Sentry in good repair, condition and working order, ordinary wear
and tear resulting from proper use thereof alone excepted, to the location to be
advised by Sentry. Upon return, all components of the Equipment shall be clean,
and shall include all instruction manuals, operating software, and all other
items that are necessary to or would facilitate the operation of the Equipment
as intended by the manufacturer. All costs of replacing missing components and
repairing non-working components shall be borne by Customer. At Customer's
option, Sentry shall clean the returned Equipment (or cause it to be cleaned),
the reasonable costs of which shall be paid by Customer. The deinstallation of
the Equipment shall be done in a manner resulting in no harm or damage either to
the Equipment or to any equipment to which the Equipment is attached. Sentry
shall have the sole right and option to make all the arrangements for (i) the
transportation of each Financed Item to and the installation of each Financed
Item at the Equipment Location stated in the applicable Equipment Schedule, and
(ii) the discontinuance, disassembly, packing and transportation of each
4
<PAGE> 5
Counterpart No. 2
Financed Item from the Equipment Location to a location of Sentry's choice
within the continental United States upon the termination of the applicable
Equipment Schedule (by expiration or otherwise) as to such Financed Item. All
costs of deinstallation, packaging, insurance and transportation of the
Equipment will be borne by Customer.
16. DEFAULT. The occurrence of any of the following events, among
others, shall constitute an Event of Default and shall, at the option of Sentry,
terminate (a) any or all Equipment Schedule(s) with respect to which such Event
of Default relates and lb) Customer's right to possession of the Equipment:
(i) The nonpayment by Customer of any Payment within 10 days of the
date on which it is due.
(ii) The failure by Customer to perform or observe any other term,
covenant or condition of this Agreementor any Equipment Schedule, which is not
cured within 10 days after notice thereof from Sentry or Assignee.
(iii) Any affirmative act of insolvency by Customer, or the filing by
Customer of any petition or action under any bankruptcy, reorganization,
insolvency arrangement, liquidation, dissolution or moratorium law, or any other
law or laws for the relief of, or relating to debtors.
(iv) The filing of any involuntary petition against Customer under any
bankruptcy, reorganization, insolvency arrangement, liquidation, dissolution or
moratorium law for the relief of or relating to debtors which is not dismissed
within 60 days thereafter, or the appointment of any receiver, liquidator or
trustee to take possession of any substantial portion of the properties of
Customer, unless the appointment is set aside or ceases to be in effect within
60 days from the date of said filing or appointment.
(v) The subjection of a substantial part of Customer's property or any
Financed Item to any levy, seizure, assignment or sale for or by any creditor or
governmental agency.
(vi) Any representation or warranty made by Customer in this Agreement
or in any Equipment Schedule or in any document furnished by Customer to Sentry
or Assignee in connection with this Agreement or any Equipment Schedule or with
respect to the acquisition or use of the Equipment shall be untrue in any
material respect.
(vii) The default by Customer under any other lease or loan agreement.
17. REMEDIES. Upon the happening of any Event of Default:
(i) Customer will, without demand, on the next Payment Date following
the Event of Default, pay to Sentry, as liquidated damages and not as a penalty,
an amount equal to (a) if the transaction is structured as a lease, the sum of
(1) the Casualty Value set forth in the Casualty Value Table of such Equipment
Schedule, and (11) any Payments then due and owing by Customer hereunder (where
such sum is hereinafter referred to as the "Lease Default Value"); or lb) if the
transaction is structured as a loan, the sum of (1) the present value (using as
the discount rate a rate equal to four percentage points less than the interest
rate of the loan) of the remaining Payments to be paid during the Initial Term
(together with any required balloon or similar payments), determined as of the
date of the Event of Default, and (11) any Payments (and interest) then due and
owing by Customer (where such sum is hereinafter referred to as the "Loan
Default Value");
(ii) Sentry may, without notice to or demand upon Customer:
(a) Take possession of the Equipment and use commercially reasonable
efforts to sell and/or lease the same, or any portion thereof, in such manner or
amount, and to such entity as Sentry, in Sentry's discretion shall elect,
provided that, if the original transaction under the applicable Equipment
Schedule is structured as a loan, Sentry shall provide Customer reasonable
notice (which is hereby agreed to be ten (10) business days) of its intention to
sell and/or lease the same. The proceeds of such sale and/or lease will be
applied by Sentry (A) first, to pay all costs and expenses, including reasonable
legal fees and disbursements (in-house or otherwise) incurred by Sentry as a
result of the Event of Default and the exercise of Sentry's remedies with
respect thereto; (B) second, to pay Sentry an amount equal to the Lease Default
Value or the Loan Default Value, as the case may be, to the extent not
previously paid by Customer, and (C) third, to reimburse Customer for the Lease
Default Value or the Loan Default Value, as the case may be, to the extent
previously paid by Customer. Any surplus remaining thereafter will be retained
by Sentry, in the case of a transaction structured as a lease, or by Customer,
in the case of a transaction structured as a loan. To the extent Customer has
not paid Sentry the amounts specified in this Section 17, Customer will
forthwith pay such amounts to Sentry plus interest at the Late Payment Rate on
such amounts, computed from the date the Lease Default Value or the Loan Default
Value, as the case may be, is payable hereunder until such amounts are paid.
(b) Take possession of the Equipment and hold and keep idle the same or
any portion thereof. The exercise of any of the foregoing remedies by Sentry
will not constitute a termination of this Agreement or any Equipment Schedule
unless Sentry so notifies Customer in writing. No remedy referred to in this
Section 17 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to Sentry
at law or in equity. In the event the transaction is structured as a loan (or is
otherwise determined to be a loan), Sentry shall have (in addition to all other
rights and remedies granted hereunder or otherwise) all the rights and remedies
provided to a secured party by the Uniform Commercial Code with respect to all
parts of the Equipment which are and which are deemed to be governed by the
Uniform Commercial Code.
5
<PAGE> 6
Counterpart No. 2
18. SPECIAL TERMS; CERTAIN DEFINITIONS. Any special terms set forth in
one or more Exhibits, Schedules or Riders to this Agreement as they apply to the
applicable Equipment Schedule(s) will be applicable as though fully set forth
herein. When used in this Agreement or any Equipment Schedule(s): (i) "Fair
Market Value" shall mean the in-place value of the Equipment to Customer, as
reasonably determined by Lessor, which would be obtained in an arms-length
transaction between an informed and willing buyer-user under no compulsion to
buy and an informed and willing seller under no compulsion to sell, where the
costs of installation, removal and advertising from the places the Equipment is
or will be located pursuant to this Agreement during the Initial Term shall not
be a deduction from such value; and (ii) "Fair Rental Value" shall mean the
in-place value of the Equipment to the Customer, as reasonably determined by
Lessor, which would be obtained in an arms-length transaction between an
informed and willing user under no compulsion to lease and an informed and
willing lessor under no compulsion to lease, where the costs of installation,
removal and advertising from the places the Equipment is or will be located
pursuant to this Agreement during the Initial Term shall not be a deduction from
such value.
19. ARTICLE 2A WAIVERS. To the full extent permitted by applicable law,
Customer hereby waives any and all rights and remedies conferred upon a lessee
by sections 2A-508 through 2A-522 of the Uniform Commercial Code ("UCC")
including, but not limited to, Customer's rights to: (i) cancel or repudiate
this Agreement or any Equipment Schedule; (ii) reject or revoke acceptance of
the Equipment after Customer has accepted such Equipment (pursuant to a
Certificate of Acceptance therefor or otherwise); (iii) a security interest in
the Equipment in Customer's possession or control for any reason; (iv) deduct
all or any part of any claimed damages resulting from Lessor's default, if any,
under this Agreement or any Equipment Schedule; (v) accept partial delivery of
the Equipment; (vi) "cover" by making any purchase or lease of or contract to
purchase or lease Equipment in substitution for those due from Lessor during the
Agreement term; (vii) recover any general, special, incidental or consequential
damages, for any reason whatsoever; and (viii) specific performance, replevin,
detinue, sequestration, claim and delivery or the like for any Equipment
identified to this Agreement. To the extent permitted by applicable law,
Customer also hereby waives any rights now or hereafter conferred by statute or
otherwise which may require Lessor to sell, lease or otherwise use any Equipment
in mitigation of Lessor's damages as set forth in Section 17 of this Agreement
or which may otherwise limit or modify any of Lessor's rights or remedies under
Section 17.
20. MISCELLANEOUS.
(a) EFFECT OF WAIVER. No delay or omission to exercise any right or
remedy accruing to Sentry upon any breach or default of Customer will impair any
such right or remedy or be construed to be a waiver of any such breach or
default, nor will a waiver of any single breach or default be deemed a waiver of
any other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval on the part of Sentry of any breach or default under
this Agreement, or any Equipment Schedule or of any provision or condition
hereof or thereof, must be in writing specifically set forth. All remedies,
either under this Agreement or any Equipment Schedule, or at law or in equity or
otherwise afforded to Sentry, are cumulative and not alternate.
(b) NOTICES. Any notice required or permitted to be given by the
provisions hereof must be in writing and will be conclusively deemed to have
been received by a party hereto on the day it is delivered to such party at the
address indicated below (or at such other address as such party specifies to the
other party in writing) or, if sent by registered or certified U.S. mail, on the
third business day after the day on which mailed, addressed to such party at
such address:
IF TO SENTRY: One Utah Center
201 South Main Street, Suite 1400
Salt Lake City, UT 84111-2215
Attention: General Counsel
IF TO CUSTOMER: As set forth in the applicable Equipment
Schedule.
(c) APPLICABLE LAW. This Agreement and Equipment Schedule(s) will be
governed by, and construed in accordance with, the laws of the State of Utah
(without giving effect to principles relating to conflicts of laws). Customer
hereby irrevocably consents to the exclusive jurisdiction of the Third Judicial
District Court for Salt Lake County, State of Utah or, if such court for any
reason dies not have jurisdiction, then Customer hereby consents to the
exclusive jurisdiction of the United States Federal District Court for the State
of Utah, Central Division (the applicable court is hereafter referred to as (the
"Court"), for a determination of any dispute as to any matters hereunder
("Proceeding") and authorizes service of process by the Court for a
determination of any Proceeding as to any such matters by service of process on
Customer by certified or registered mail sent to Customer at the address
referred to in Section 1 9(b) above. Customer irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of venue of any Proceeding in the Court and any claim that
any Proceeding brought in the Court has been brought in an inconvenient forum.
Notwithstanding the foregoing,
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Counterpart No. 2
Sentry may bring a Proceeding in any court of any other jurisdiction where
Customer or any of its property may be found, and Customer irrevocably submits
to the jurisdiction of each such court in respect of any such Proceeding.
(d) SECURITY INTEREST.
(i) Each executed copy of this Agreement will be an original. To the
extent, if any, that this Agreement constitutes chattel paper (as such term is
defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Agreement may be created through the
transfer or possession of any counterpart other than an original.
(ii) There shall be only one original of each Equipment Schedule to
this Agreement, and it shall be marked "Counterpart No. 1," and all other
counterparts will be marked "Counterpart No. 2." To the extent, if any, that any
Equipment Schedule(s) to this Agreement constitutes chattel paper (as such term
is defined in the Uniform Commercial Code., as in effect in any applicable
jurisdiction), no security interest in any Equipment Schedule(s) may be created
in any document(s) other than Counterpart No. 1.
(iii) If the transaction documented under an Equipment Schedule is
structured as a loan (or is determined to be other than a true lease under
applicable law), Customer hereby grants to Sentry a first priority security
interest in and to the Equipment described therein together with all proceeds
and products thereof and all after-acquired property.
(e) SUSPENSION OF OBLIGATIONS OF SENTRY. The obligations of Sentry
hereunder will be suspended to the extent that Sentry is hindered or prevented
from complying therewith because of labor disturbances including, but not
limited to, strikes and lockouts, acts of God, fires, storms, accidents, failure
of the manufacturer to deliver any Financed Item, governmental regulations or
interference or any cause whatsoever not within the sole and exclusive control
of Sentry.
(f) FINANCIAL STATEMENTS. Customer agrees promptly to furnish, or cause
to be furnished, to Sentry and Assignee (i) within forty-five (45) days of the
end of each fiscal quarter, and (ii) within one hundred twenty (120) days of the
end of each fiscal year, financial statements of Customer prepared in accordance
with generally accepted accounting principles and audited by a firm of
independent certified public accountants, together with such other financial and
related information respecting Customer or the Equipment as Sentry or Assignee
may from time to time reasonably request.
(g) ENTIRE AGREEMENT. Sentry and Customer acknowledge that there are no
agreements or understandings, written or oral, between Sentry and Customer with
respect to the Equipment, other than as set forth herein and in each Equipment
Schedule and that this Agreement and each Equipment Schedule contain the entire
agreement between Sentry and Customer with respect thereto. Neither this
Agreement nor any Equipment Schedule may be altered, modified, terminated or
discharged except by a writing signed by the party against which such
alteration, modification or discharge is sought.
(h) SEVERABILITY. Any provision of this Agreement or any Equipment
Schedule prohibited by, or unlawful or unenforceable under, any applicable law
or any jurisdiction shall, at the sole option of Sentry, be ineffective as to
such jurisdiction without invalidating the remaining provisions of this
Agreement; provided, however, that to the extent that the provisions of any such
applicable law can be waived, they are hereby waived by Customer.
(i) NONSPECIFIED FEATURES. If the transaction is structured as a lease
and if the Equipment delivered pursuant to any Equipment Schedule contains any
features not specified therein, Customer grants Sentry, at Sentry's option and
Sentry's expense, the right to remove or deactivate any of such features. Such
removal or deactivation shall be performed by the manufacturer or another party
reasonably acceptable to Customer upon the request of Sentry, at a time
convenient to Customer, provided that Customer shall not unreasonably delay the
removal of such features.
(j) QUIET ENJOYMENT. Provided that no Event of Default has occurred or
is continuing hereunder, Sentry (or Assignee) shall not interfere with
Customer's right of quiet enjoyment and use of the Equipment.
(k) SUBSTITUTION. If the transaction is structured as a lease, Sentry
may, upon written notice to Customer, provide Equipment with different serial
numbers and locations than those shown on the applicable Equipment Schedule. Any
such substituted Equipment will meet or exceed specifications of Equipment
specified on the applicable Equipment Schedule.
(l) ALTERATIONS. Customer shall be permitted with Sentry's prior
written consent and at Customer's own expense to make alterations or
improvements to the Equipment which are readily removable without causing
material damage to the Equipment and do not adversely affect any manufacturer's
warranties with respect to such Equipment. Any alterations that are not removed
by Customer prior to the return of the Equipment to or as directed by Sentry
shall become the sole and exclusive property of Sentry.
(m) HEADINGS. Section headings are for convenience only and shall not
be construed as part of this Agreement.
(n) SUCCESSORS. This Agreement shall inure to and bind the permitted
successors and assigns of the respective parties.
7
<PAGE> 8
Counterpart No. 2
(o) SUPPLIER NOT AN AGENT OF LESSOR. Customer understands and agrees
that neither the manufacturer, seller or supplier, nor any salesperson or other
agent of the manufacturer, seller or supplier, is an agent of Lessor. No
salesperson or agent of the manufacturer, seller or supplier is authorized to
waive or alter any term or condition of this Agreement, and no representation as
to Equipment or any other matter by manufacturer, seller or supplier shall in
any way affect Customer's duty to pay Rent and perform its other obligations as
set forth in this Agreement.
(p) STATUTE OF LIMITATIONS. Any action by Customer against Lessor for
any default by Lessor under this Agreement, including breach of warranty or
indemnity, shall be barred unless commenced within one (1) year after any such
cause of action accrues.
IN WITNESS WHEREOF, Sentry and Customer have caused this Agreement to
be duly executed as of the date first above written.
SENTRY: CUSTOMER:
SENTRY FINANCIAL CORPORATION, VENTURI TECHNOLOGIES, INC.
a Utah corporation a Texas corporation
By: /s/ Jonathan M. Ruga By: /s/ Gaylord Karren
----------------------- ----------------------
Name: Jonathan M. Ruga Name: Gaylord Karren
Title: Chief Executive Officer Title: Chairman and CEO
8
<PAGE> 1
EXHIBIT 4.10
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT ("Master Lease") is dated as of February
17, 1998 by and between NORTHSTAR CAPITAL, LLC, a Utah limited liability company
("Northstar"), having its principal office and place of business at 170 South
Main Street, Suite 1600, Salt Lake City, Utah 84101 and VENTURI TECHNOLOGY
ENTERPRISES, INC., a Nevada corporation ("Venturi"), having its principal office
and place of business at 1327 North State Street, Orem, Utah 84057
(individually, a "Party" and collectively, the "Parties").
RECITALS
A. Venturi wishes to acquire new trucks and certain equipment, together
with all replacements, parts, repairs, additions, attachments and accessories
thereto (collectively, the "Equipment"), for use in its carpet-cleaning
business, and requires financing for the Equipment.
B. Northstar has agreed to provide or arrange for the funding necessary
for the purchase of the Equipment in three separate phases (each, a "Phase"),
and Venturi has agreed to lease the Equipment from Northstar or an assignee of
Northstar, subject to certain terms and conditions agreed upon by the Parties.
IN CONSIDERATION of the mutual agreements set forth hereinafter and the
payment of rent as provided for herein, the parties agree as follows:
I. FUNDING
1. FUNDING AND LEASE COMMITMENT. Northstar hereby agrees to provide or
arrange for funding in the maximum amount of Three Million Dollars ($3,000,000),
to be used for the purchase of Equipment, subject to the terms and conditions
set forth herein.
2. PRIVATE PLACEMENT BY VENTURI. Venturi has entered into an agreement
with Equity Services, Ltd., pursuant to which Equity Services, Ltd. has agreed
to complete a private placement of equity (the "Private Placement"), which shall
provide Venturi with gross proceeds in an amount not less than Three Million
Dollars ($3,000,000), to be completed in three phases of not less than One
Million Dollars ($1,000,000) each. The first phase of the Private Placement has
been completed, and the second and third phases shall be completed prior to the
funding of Phases 2 and 3, respectively.
3. PHASES. The funding for purchases of Equipment ("Equipment
Purchases") made in each Phase shall be in the maximum aggregate amount of One
Million Dollars ($1,000,000). Upon the execution hereof, Northstar shall be
obligated to provide or arrange for the funding of the first Phase. Northstar
shall have the option, but not the obligation, to provide or arrange for funding
for the second and third Phases, which funding shall be made available on a
"best efforts" basis and only upon the successful completion by Venturi of the
second and third phases, respectively, of the Private Placement. As a condition
precedent to the funding of each Phase, Venturi shall provide to Northstar
documentation evidencing to Northstar's satisfaction the completion of each
corresponding phase of the Private Placement.
4. STAGING. The funding for the first Phase shall be staged as follows:
(i) Three Hundred Fifty Thousand Dollars ($350,000) shall be made available on
February 15, 1998; (ii) another Three Hundred Fifty Thousand Dollars ($350,000)
shall be made available on March 15, 1998; and (iii) the remaining Three Hundred
Thousand Dollars ($300,000) shall be made available on April 15, 1998. Funding
for the second and third Phases may be staged in similar increments, at
Northstar's option.
5. SOURCE OF FUNDS. Northstar may, at its option, arrange for funding
from sources other than Northstar, and Venturi hereby agrees that the source of
the funds shall have no effect on its obligations to Northstar or its assignees
hereunder.
II. LEASE PROVISIONS
1. AGREEMENT TO LEASE; EQUIPMENT SCHEDULES. Northstar hereby agrees to
lease to Venturi, and Venturi hereby agrees to lease from Northstar, the
Equipment, on the terms and subject to the conditions set forth herein. Each
Equipment Purchase shall be made in an amount not less than Two Hundred Fifty
Thousand Dollars
<PAGE> 2
($250,000.00), and the specific items purchased as part of such Equipment
Purchase (each, a "Leased Item") and the Parties' obligations hereunder with
respect to such Equipment shall be documented on a schedule, in substantially
the form attached hereto as Exhibit A, (an "Equipment Schedule") listing each
Leased Item included in such Equipment Purchase. Each Equipment Schedule issued
hereunder shall incorporate all of the terms and conditions of this Master Lease
and shall contain such additional terms and conditions with respect to the
Equipment listed thereon as Northstar and Venturi shall agree upon, and each
shall constitute a separate, binding lease agreement, enforceable in accordance
with the terms thereof. In the event of a conflict between the terms of this
Master Lease and the terms of any Equipment Schedule issued hereunder, the
language of the Equipment Schedule shall prevail, but with respect to that
Equipment Schedule only.
2. GRANT OF SECURITY INTEREST. As a precaution in the event (and only
to the extent) that a transaction documented under an Equipment Schedule is
determined to be other than a true lease under applicable law, Venturi hereby
grants to Northstar a first priority security interest in and to the Equipment
described therein together with all proceeds and products thereof. Venturi shall
execute such other documents as reasonably deemed necessary by Northstar to
evidence and perfect the security interest granted herein.
To the extent, if any, that this Master Lease constitutes chattel paper
(as such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest in this Master Lease may be
created through the transfer or possession of any counterpart other than the
original hereof. In addition, there may be more than one "original" counterpart
of each Equipment Schedule issued hereunder, one of which shall be marked
"Counterpart No. l," and all others of which shall be marked "Counterpart No.
2." To the extent, if any, that any Equipment Schedule to this Master Lease
constitutes chattel paper (or as such term is defined in the UCC as in effect in
any applicable jurisdiction) no security interest in any Equipment Schedule may
be created through the transfer or possession of any counterpart of such
Equipment Schedule other than "Counterpart No. 1".
3. EQUIPMENT PURCHASES. Equipment to be purchased pursuant to this
Master Lease shall be selected by Venturi, and Venturi shall make the
arrangements for each Equipment Purchase, subject to the prior approval of
Northstar. However, Northstar may, upon written notice to Venturi, provide
Equipment with different serial numbers and locations than those shown on the
applicable Equipment Schedule if Northstar determines that it is in the best
interests of both Venturi and Northstar to do so, provided that such substituted
Equipment meets or exceeds the specifications of the Equipment specified on the
applicable Equipment Schedule. All Equipment purchased pursuant to this Master
Lease shall be purchased new from the vendor. The amount of an Equipment
Purchase (the "Acquisition Cost") shall include the cost of the Equipment
purchased, together with the cost of delivery, installation, warranties, and/or
service contracts, which service contracts shall be coterminous with the Initial
Term of the Equipment Schedule documenting such Equipment Purchase. Northstar,
at its option, shall have the right to make all the arrangements for the
transportation of each Leased Item to and the installation of each Leased Item
at the Equipment Location designated in the applicable Equipment Schedule.
4. TAKEDOWNS; CONDITIONS PRECEDENT. The execution of an Equipment
Schedule and the funding of the corresponding Equipment Purchase (a "Takedown")
shall occur within five (5) business days of the Acceptance Date (as hereinafter
defined) for the applicable Equipment Schedule. Takedowns during a Phase may
occur only within the period beginning with the first Takedown included within
such Phase and continuing for twelve (12) months thereafter (a "Takedown
Period"). The following are conditions precedent to each Takedown: (i) all
necessary agreements and documents, including without limitation purchase
agreements with vendors, which agreements shall include a fixed purchase price
for each item of Equipment to be purchased, shall have been properly executed;
(ii) Venturi shall have delivered to Northstar such other documents,
instruments, certificates and assurances relating to the applicable Equipment
Schedule, as Northstar may reasonably request, each in form and substance
satisfactory to Northstar; and (iii) no default by Venturi shall have occurred
or be occurring hereunder.
5. TERM. The term of this Master Lease shall commence on the date set
forth above and shall continue thereafter so long as any Equipment Schedule
issued hereunder remains in effect.
6. RENT. Monthly rent ("Monthly Rent") and other rents due hereunder
shall be payable as set forth in the applicable Equipment Schedule.
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<PAGE> 3
7. ACCEPTANCE; WARRANTIES; LIMITATION OF LIABILITY. Venturi has
selected or will select the type, quantity and supplier of each Leased Item, and
in reliance thereon, such Equipment has been or will be ordered by Northstar
from such supplier, or Northstar has accepted or will accept an assignment of an
existing purchase order therefor. Venturi represents and agrees that, as of the
date upon which it accepts the Equipment listed on an Equipment Schedule (the
"Acceptance Date"), Venturi shall execute a certificate in substantially the
form attached hereto as Exhibit B, certifying with respect to each Leased Item
listed on the corresponding Equipment Schedule (i) that the Leased Item is of a
size, design, capacity and manufacture selected by Venturi, and (ii) that
Venturi has inspected the Leased Item and found it to be in good order, and
(iii) that Venturi has unconditionally accepted the Leased Item, without
prejudice, however, to any right or remedy Venturi may have against the
manufacturer or supplier thereof. NORTHSTAR SHALL HAVE NO LIABILITY TO VENTURI
FOR ANY CLAIM, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY,
INDIRECTLY, INCIDENTLY OR CONSEQUENTIALLY BY THE EQUIPMENT, BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN, BY ANY INCIDENT WHATSOEVER IN
CONNECTION THEREWITH, ARISING IN STRICT LIABILITY, NEGLIGENCE OR OTHERWISE, OR
IN ANY WAY RELATED TO OR ARISING OUT OF THIS MASTER LEASE OR OTHER AGREEMENT OR
DOCUMENT EXECUTED IN CONNECTION WITH THIS MASTER LEASE. NORTHSTAR MAKES NO
EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING THOSE OF MERCHANTABILITY,
DURABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
EQUIPMENT AND EXPRESSLY DISCLAIMS THE SAME. Notwithstanding the foregoing,
Venturi shall be entitled to the benefit of any applicable manufacturer's
warranties, and, to the extent assignable, such warranties are hereby assigned
by Northstar to Venturi, and Venturi shall take all reasonable action to enforce
such warranties.
8. ASSIGNMENT. Northstar may assign, pledge, sell, encumber, or
otherwise convey all or a portion of its right, title and interest in and to the
Equipment, this Master Lease, and/or any Equipment Schedule, to one or more
lessors, lenders, or funding sources (individually, an "Assignee", collectively
the "Assignees"). Venturi hereby (i) consents to such assignments and
conveyances, (ii) agrees to promptly execute and deliver, from time to time and
at no cost or expense to Northstar, such further acknowledgments, agreements and
other instruments as may be reasonably requested by Northstar or any Assignee to
effect such assignments and conveyances, and (iii) agrees to comply fully with
the terms of any such assignments or conveyances, provided that such conveyances
shall not change the timing or amount of Venturi's remaining payment obligations
hereunder nor materially change Venturi's other remaining rights and obligations
hereunder. Venturi agrees that Northstar may assign or convey this Lease and/or
Northstar's interest in the Equipment even if such assignment or conveyance
could be deemed to materially affect the interest of Venturi. In the event of
such an assignment or conveyance by Northstar, all references herein to
Northstar shall be deemed to refer equally to Assignee and give such Assignee
full right and authority to enforce the rights of Northstar hereunder; provided,
however, that Assignee shall not be obligated to perform the obligations of
Northstar hereunder unless Assignee expressly agrees to do so in writing.
VENTURI SHALL HAVE NO RIGHT TO ASSIGN ANY EQUIPMENT SCHEDULE OR TO SUBLEASE THE
EQUIPMENT WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT OF NORTHSTAR, WHICH CONSENT
MAY BE GRANTED OR WITHHELD IN NORTHSTAR'S SOLE DISCRETION.
9. NET LEASE; OBLIGATION TO PAY RENT UNCONDITIONAL. This Master Lease
is a net lease and Venturi agrees that its obligation to make all payments of
Interim Rent, Monthly Rent, and all other sums payable hereunder, including
without limitation sums due pursuant to Section 13 below (collectively, "Rent"),
and the rights of Northstar in and to such Rent, are absolute and unconditional
and are not subject to any abatement, reduction, setoff, defense, counterclaim
or recoupment due or alleged to be due, to or by reason of, any past, present or
future claims which Venturi may assert against Northstar, any Assignee, the
manufacturer or seller of the Equipment, or against any person for any reason
whatsoever.
10. INSTALLATION, MAINTENANCE AND REPAIR. Venturi shall, at its
expense, be responsible for the delivery, installation, de-installation,
redelivery, maintenance and repair of the Equipment by a party acceptable to
Northstar. Northstar shall have no liability for any delay in delivery or
failure by the supplier to deliver any Leased Item or to fill any purchase order
or meet the conditions thereof.
Venturi agrees, at all times during the term of each Equipment
Schedule, at its sole expense, to keep the Equipment in good repair, condition
and working order, and to furnish all parts, mechanisms or devices which may be
required in the course of so doing. Venturi shall at all times during the term
of each Equipment Schedule maintain in force a maintenance agreement covering
the Equipment with the manufacturer thereof or such other party as may be
reasonably acceptable to Northstar and, upon the surrender of the Equipment to
Northstar, Venturi shall provide a letter from the manufacturer(s) of the
Equipment certifying that the Equipment is eligible for continued
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<PAGE> 4
maintenance under such maintenance agreement. Northstar shall have the right,
but not the obligation, to inspect the Equipment during reasonable business
hours.
11. ALTERATIONS. Venturi shall be permitted with Northstar's prior
written consent and at Venturi's own expense to make alterations or improvements
to the Equipment which are readily removable without causing material damage to
the Equipment and do not adversely affect any manufacturer's warranty with
respect to such Equipment. Any alterations that are not removed by Venturi prior
to the return of the Equipment to or as directed by Northstar shall become the
sole and exclusive property of Northstar. When requested to do so, Venturi shall
permit manufacturer access to the Equipment to install "no charge" engineering
changes in order to update the Equipment to current engineering levels.
12. INSURANCE. Venturi, at its sole expense, shall insure the Equipment
against all risks, in such amounts (but not less than the Casualty Value, as
defined hereinafter), upon terms and with carriers reasonably acceptable to
Northstar. Such insurance shall insure against, among other exposures, damage or
destruction of the Equipment, bodily and personal injury, property damage
liabilities and other risks customarily and reasonably insured against by
Venturi on Equipment owned by Venturi. All such insurance shall name Northstar
(and, if requested by Northstar, its Assignee) as an additional insured for all
liability insurance and as sole loss payee of all casualty insurance, and must
provide that such insurance may not be canceled or altered without at least 30
days prior written notice to Northstar (and, if requested by Northstar, its
Assignee). Upon Northstar's prior written consent, Venturi may act as a
self-insurer in amounts acceptable to Northstar.
13. LIENS AND TAXES. Venturi shall, at its sole expense, keep the
Equipment free and clear of all levies, liens and encumbrances. Venturi shall
not assign or otherwise encumber this Master Lease, any Equipment Schedule or
any of its rights hereunder without the prior written consent of Northstar.
Venturi shall declare and pay to the appropriate governmental authorities when
due all license fees, registration fees, assessments, charges and taxes, whether
municipal, state or federal, including, but not limited to, sales, use, excise
and property taxes, and penalties and interest with respect thereto, excluding,
however, any taxes based on or measured solely by Northstar's net income.
Venturi shall provide evidence of any payment hereunder upon request of
Northstar. Amounts payable under this Section shall be additional Rent. Any
obligations under this paragraph arising prior to the expiration of this Master
Lease or the Initial Term (or any renewal term) of any Equipment Schedule shall
survive the expiration or other termination of this Master Lease or the
applicable Equipment Schedule.
14. EQUIPMENT IS PERSONAL PROPERTY; LOCATION OF EQUIPMENT. Venturi
covenants and agrees that the Equipment is, and shall at all times be and
remain, personal property of Northstar. If requested by Northstar, Venturi shall
obtain, prior to delivery of any Leased Item, a certificate in a form
satisfactory to Northstar from all parties with an interest in the premises
wherein the Equipment may be located, waiving any claim with respect to the
Equipment.
Venturi shall not move any Leased Item nor permit any Leased Item to be
moved from the location or area set forth in the applicable Equipment Schedule
without Northstar's consent, which consent shall not be unreasonably withheld;
PROVIDED, HOWEVER, that no Equipment which is movable (or is otherwise located
on or incorporated into a moving vehicle) shall be temporarily located outside
the state in which such Equipment is located for any period without Northstar's
prior written consent; and, PROVIDED FURTHER, HOWEVER, that in no event shall
any Leased Item be moved to a location outside the United States of America.
15. DESIGNATION OF OWNERSHIP. If at any time during the term hereof
Venturi is supplied with labels, plates or other markings stating that the
Equipment is owned by Northstar or is subject to any interest of an Assignee,
Venturi agrees to affix and keep the same prominently displayed on the
Equipment. Venturi agrees to execute and file Uniform Commercial Code financing
statements and any and all other instruments necessary to perfect Northstar's
interest in this Master Lease, Equipment Schedule(s), the payments due
hereunder, or the Equipment. Northstar may file a copy of this Master Lease and
appropriate Equipment Schedule(s) as a financing statement. In addition, Venturi
agrees to pay all reasonable costs and expenses incurred by Northstar including,
without limitation, attorneys' fees and UCC search fees, in connection with the
actions taken by Northstar to complete each Equipment Schedule.
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<PAGE> 5
16. USE. Venturi shall use the Equipment only for purposes of operating
its business, and in a careful and proper manner in conformance with
manufacturer's specifications, and shall comply with, and conform to, all
federal, state, municipal and other laws, ordinances and regulations in any way
relating to the possession, use or maintenance of the Equipment.
17. REPRESENTATIONS AND WARRANTIES. Venturi represents and warrants for
the benefit of Northstar, and if requested by Northstar shall provide an opinion
of counsel and other supporting documents to the effect, that, at the time of
execution of this Agreement and of each Equipment Schedule:
(a) Venturi is a legal entity, duly organized, validly existing
and in good standing under the laws of the jurisdiction where the
Equipment shall be located and has adequate power to enter into and
perform this Master Lease and each Equipment Schedule executed
hereunder;
(b) This Master Lease and each Equipment Schedule issued
hereunder have been duly authorized, executed and delivered by Venturi
and together constitute a valid, legal and binding agreement of
Venturi, enforceable in accordance with its terms;
(c) The entering into and performance of this Master Lease and
each Equipment Schedule issued hereunder shall not violate any
judgment, order, law or regulation applicable to Venturi or any
provision of Venturi's articles of incorporation or bylaws or result in
any breach of, or constitute a default under, or result in the creation
of any lien, charge, security interest or other encumbrance upon any
assets of Venturi or on the Equipment pursuant to any instrument to
which Venturi is a party or by which it or its assets may be bound;
(d) There are no actions, suits or proceedings pending or, to
the knowledge of the Venturi, threatened, before any court,
administrative agency, arbitrator or governmental body which shall, if
determined adversely to Venturi, materially adversely affect its
ability to perform its obligations under this Master Lease, or any
Equipment Schedule issued hereunder or any related agreement to which
Venturi is a party;
(e) Venturi is not a tax exempt organization;
(f) Venturi is not in any material default under any other loan or
lease agreements; and
(g) Venturi is not insolvent and shall not be rendered insolvent
by any transaction contemplated by this Master Lease or any
Equipment Schedule.
18. At all times during the term hereof, Venturi shall keep in full
force and effect its existence and rights as a corporation under the laws of the
jurisdiction of its incorporation and shall obtain and preserve its right to do
business as a corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Master
Lease and each Equipment Schedule issued hereunder.
19. FINANCIAL STATEMENTS. Venturi agrees promptly to furnish, or cause
to be furnished, to Northstar (i) within forty-five (45) days of the end of each
fiscal quarter, financial reports prepared internally by Venturi and certified
by an officer of Venturi; and (ii) within one hundred twenty (120) days of the
end of each fiscal year, financial statements of Venturi prepared in accordance
with generally accepted accounting principles, and audited by a firm of
independent certified public accountants, together with such other financial and
related information respecting Venturi or the Equipment as Northstar may from
time to time reasonably request.
20. RISK OF LOSS AND DAMAGE.
(a) Venturi agrees to bear the entire risk of loss with respect to
any damage, destruction, loss, theft, or governmental taking of any
Leased Item, whether partial or complete and whether or not through any
default or neglect of Venturi. Except as expressly provided herein, no
such event shall relieve Venturi of its obligation to pay Rent
hereunder.
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<PAGE> 6
(b) If any Leased Item is damaged, Venturi shall promptly
notify Northstar and within thirty (30) days of such damage shall, at
Venturi's expense, cause such repairs to be made as are necessary to
return such Leased Item to its previous condition. Venturi shall then,
and only then, be entitled to receive from Northstar any insurance
proceeds received or attributable to such damage.
(c) In the event that any Leased Item is destroyed, damaged beyond
repair, lost, stolen, or taken by government action for an indefinite
period or for a stated period extending beyond the term of the
applicable Equipment Schedule(s) (each an "Event of Loss"), Venturi
shall promptly notify Northstar and pay to Northstar on the next Basic
Rent payment date following the Event of Loss, an amount equal to the
value ("Casualty Value") of such Leased Item (as set forth in the
Casualty Value Table for the applicable Equipment Schedule in the form
annexed hereto as Exhibit C) in effect on the date of the Event of
Loss, together with all Rent accrued with regard to such item up to the
date of payment. Upon payment of such amounts, Venturi's obligation to
pay any further Rent shall cease with respect to that Leased Item (but
not with respect to any remaining Equipment) and Venturi shall be
entitled to receive any insurance proceeds or other recovery received
by Northstar in connection with such Event of Loss.
(d) In the event of a governmental taking of a Leased Item for a
stated period which does not extend beyond the term of the applicable
Equipment Schedule(s), all obligations of Venturi with respect to such
Leased Item (including payment of Rent) shall continue. So long as
Venturi is not in default hereunder, Northstar shall pay to Venturi all
sums received by Northstar by reason of such governmental taking up to
the amount paid by Venturi during such period.
21. INDEMNITY. Venturi agrees to indemnify, hold harmless and defend
Northstar from and against any and all claims, demands, actions, suits,
proceedings, costs, expenses, damages and liabilities, at law or in equity,
(including reasonable outside counsel fees, allocated costs of internal counsel
and disbursements for both), arising out of, connected with, or resulting from,
this Master Lease, any Equipment Schedule executed hereunder, or the Equipment,
including, without limitation: (i) the manufacture, selection, purchase,
delivery, possession, condition, use, operation or return thereof, and (ii) the
enforcement of this Master Lease, any Equipment Schedule, and any other
documents delivered thereunder, including any out-of-court workout or in any
bankruptcy case. Any obligations under this paragraph arising prior to the
expiration of this Master Lease or the Initial Term (or any renewal term) of any
Equipment Schedule shall survive the expiration or other termination of this
Master Lease or the applicable Equipment Schedule.
22. NORTHSTAR'S RIGHT TO CURE. Should Venturi fail to make any payment
or fail to do any act required herein, which failure, in Northstar's judgment,
may adversely affect Northstar's interest in the Equipment, Northstar has the
right, but not the obligation, and without releasing Venturi from any obligation
hereunder, to make or do the same, to pay, purchase, contest or compromise any
encumbrance, charge or lien which, in the judgment of Northstar, appears to
affect the Equipment and, in exercising any such rights, incur any liability and
expend whatever amount Northstar may, in Northstar's absolute discretion, deem
necessary therefor. All sums so incurred or expended by Northstar shall be,
without demand, immediately due and payable by Venturi, shall be considered Rent
hereunder, and shall bear interest at the rate of two percent (2%) per month or
the highest interest rate legally permissible, whichever is less ("Late Payment
Rate").
23. DEFAULT. The occurrence of any of the following events, among
others, shall constitute an Event of Default:
(a) The nonpayment by Venturi of any payment of Rent within ten
(10) days of the date on which it is due.
(b) The failure by Venturi to perform or observe any other term,
covenant or condition of this Master Lease or any Equipment Schedule,
if such failure is not cured within ten (10) days after Venturi's
receipt of notice thereof from Northstar.
(c) Any affirmative act of insolvency by Venturi, or the filing by
Venturi of any petition or action under any bankruptcy, reorganization,
insolvency arrangement, liquidation, dissolution or moratorium law, or
any other law or laws for the relief of, or relating to debtors.
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<PAGE> 7
(d) The filing of any involuntary petition against Venturi under
any bankruptcy, reorganization, insolvency arrangement, liquidation,
dissolution or moratorium law for the relief of or relating to debtors
which is not dismissed within sixty (60) days thereafter, or the
appointment of any receiver, liquidator or trustee to take possession
of any substantial portion of the properties of Venturi, unless the
appointment is set aside or ceases to be in effect within sixty (60)
days from the date of said filing or appointment.
(e) The subjection of a substantial part of Venturi's property or
any Leased Item to any levy, seizure, assignment or sale for or by any
creditor or governmental agency.
(f) Any representation or warranty made by Venturi in this Master
Lease or in any Equipment Schedule or in any document furnished by
Venturi to Northstar in connection with this Master Lease or any
Equipment Schedule or with respect to the acquisition or use of the
Equipment shall be untrue in any material respect.
(g) The default by Venturi under any other material lease or loan
agreement.
24. REMEDIES. Upon the happening of any Event of Default:
(a) If the default is a failure to pay any Rent in full on the date
it is required to be paid under this Master Lease or under any
Equipment Schedule, Northstar shall have the right to: (i) assess a
late fee in an amount equal to five percent (5%) of the unpaid amount,
and (ii) accrue interest at the Late Payment Rate on any Rent or other
amount not paid when due;
(b) Venturi shall, without demand, on the next Basic Rent payment
date following the Event of Default, pay to Northstar, as liquidated
damages and not as a penalty, an amount equal to the Casualty Value of
such Equipment, together with any Rent then due and owing by Venturi
hereunder as well as all costs and expenses, including commissions,
reasonable legal fees and disbursements (in-house or otherwise) and
other expenses incurred by Northstar as a result of the Event of
Default and the exercise of Northstar's remedies with respect thereto;
(c) Northstar may, at its option, without notice to or demand upon
Venturi:
(i) Take possession of the Equipment and lease and/or sell the
same, or any portion thereof, in such manner or amount, and to such
entity as Northstar, in Northstar's discretion, shall elect. If
Northstar elects to sell or lease the Equipment, Northstar may do
so at a public or private sale or lease and without demand or
notice of intention to sell or lease. If Northstar elects to give
notice to Venturi of such public or private sale, lease or other
intended disposition, such notice shall be deemed to be
commercially reasonable if notice of the time and place of any
public sale, lease or other intended disposition or the time after
which any private sale, lease or other intended disposition is to
be made shall be sent by first class, certified or registered mail
to Venturi no later than ten (10) days prior to such proposed sale,
lease or other disposition. The proceeds of such sale or lease
shall be applied by Northstar (A) first, to pay Northstar an amount
equal to the Casualty Value; and (B) second, to reimburse Venturi
for the Casualty Value to the extent previously paid by Venturi.
Any surplus remaining thereafter shall be retained by Northstar. To
the extent Venturi has not paid Northstar the amounts specified in
this Section 24, Venturi shall forthwith pay such amounts to
Northstar together with interest at the Late Payment Rate on such
amounts, computed from the date the Casualty Value is payable
hereunder until such amounts are paid in full.
(ii) Take possession of the Equipment and hold and keep idle
the same or any portion thereof.
(d) In the event that such default is not cured within thirty
(30) days from the receipt by Venturi of notice thereof, then, until
such default has been cured, Northstar shall have the right, in its
sole discretion, to require Venturi to deposit into a lock box account
at a bank acceptable to Northstar all
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<PAGE> 8
Venturi's revenues, receipts (subject to the rights of senior
lienholders), and income of any kind from any source; and Northstar
shall have the right to receive Rent payments from the lock box
account.
The exercise of any of the foregoing remedies by Northstar shall not
constitute a termination of this Master Lease or any Equipment Schedule. Any
termination hereunder shall occur only upon written notice by Northstar and
shall apply only to such Leased Item(s) as Northstar specifically identifies in
such notice. This Master Lease shall continue in full force and effect as to any
remaining Equipment Schedules or Leased Items. No remedy referred to in this
Section 24 is intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to above or otherwise available to
Northstar at law or in equity.
25. UCC WAIVERS. To the full extent permitted by applicable law,
Venturi hereby waives any and all rights and remedies conferred upon a lessee by
sections 2A-508 through 2A-522 of the Uniform Commercial Code as enacted in the
State of Utah ("UCC") including, but not limited to, Ventura's rights to: (i)
cancel or repudiate this Master Lease or any Equipment Schedule; (ii) reject or
revoke acceptance of the Equipment after Venturi has accepted such Equipment
(pursuant to a Certificate of Acceptance therefor or otherwise); (iii) a
security interest in the Equipment in Venturi's possession or control for any
reason; (iv) deduct all or any part of any claimed damages resulting from
Northstar's default, if any, under this Master Lease or any Equipment Schedule;
(v) accept partial delivery of the Equipment; (vi) "cover" by making any
purchase or lease of or contract to purchase or lease Equipment in substitution
for those due from Northstar during the Master Lease term; (vii) recover any
general, special, incidental or consequential damages, for any reason
whatsoever; and (viii) specific performance, replevin, detinue, sequestration,
claim and delivery or the like for any Equipment identified to this Master
Lease. To the extent permitted by applicable law, Venturi also hereby waives any
rights now or hereafter conferred by statute or otherwise which may require
Northstar to sell, lease or otherwise use any Equipment in mitigation of
Northstar's damages as set forth in Section 24 of this Master Lease or which may
otherwise limit or modify any of Northstar's rights or remedies under Section
24.
26. BOARD OF DIRECTORS. At any time after the first Takedown, Northstar
shall have the right, upon written notice to Venturi, to nominate one person to
serve on Venturi's Board of Directors.
27. MISCELLANEOUS.
(a) DELAY NOT A WAIVER. No delay or omission to exercise any
right or remedy accruing to Northstar upon any breach or default of
Venturi shall impair any such right or remedy or be construed to be a
waiver of any such breach or default, nor shall a waiver of any single
breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, consent or approval on
the part of Northstar of any breach or default under this Master Lease,
or any Equipment Schedule shall be in writing. All remedies, either
under this Master Lease, or at law or in equity or otherwise afforded
to Northstar, are cumulative and not exclusive.
(b) NOTICES. Any notice required or permitted to be given by the
provisions hereof must be in writing and shall be conclusively deemed
to have been received by a party hereto on the day it is delivered to
such party at the address set forth below (or at such other address as
such party specifies to the other party in writing):
IF TO NORTHSTAR: IF TO VENTURI:
Northstar Capital, LLC Venturi Technology Enterprises, Inc.
170 South Main, Suite 1600 1327 North State Street
Salt Lake City, Utah 84101 Orem, Utah 84057
or, if sent by registered or certified U.S. mail, on the fifth business
day after the day on which mailed, addressed to such party at such
address.
(c) APPLICABLE LAW. This Master Lease and the Equipment Schedule(s)
shall be governed by, and construed in accordance with, the laws of the
State of Utah (without giving effect to principles relating to
conflicts of laws). Venturi hereby consents to the exclusive
jurisdiction of the Third Judicial
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<PAGE> 9
District Court for Salt Lake County, State of Utah or, if such court
for any reason does not have jurisdiction, then Venturi hereby consents
to the exclusive jurisdiction of the United States Federal District
Court for the State of Utah, Central Division (the applicable court is
hereafter referred to as the "Court"), for a determination of any
dispute as to any matters hereunder ("Proceeding"), and authorizes
service of process by the Court for a determination of any Proceeding
as to any such matters by service of process on Venturi by certified or
registered mail sent to Venturi at the address referred to in
subparagraph (b) above. Venturi irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of venue of any Proceeding in the Court
and any claim that any Proceeding brought in the Court has been brought
in an inconvenient forum. Notwithstanding the foregoing, Northstar may
bring a Proceeding in any court of any other jurisdiction where Venturi
or any of its property may be found, and Venturi irrevocably submits to
the jurisdiction of each such court in respect of any such Proceeding.
(d) SUSPENSION OF OBLIGATIONS OF NORTHSTAR. The obligations of
Northstar hereunder shall be suspended to the extent that Northstar is
hindered or prevented from complying therewith because of labor
disturbances including, but not limited to, strikes and lockouts, acts
of God, fires, storms, accidents, failure of the manufacturer to
deliver any Leased Item, governmental regulations or interference or
any cause whatsoever not within the sole and exclusive control of
Northstar.
(e) ENTIRE AGREEMENT. Northstar and Venturi acknowledge that there
are no agreements or understandings, written or oral, between Northstar
and Venturi with respect to the Equipment, other than as set forth
herein and in each Equipment Schedule and that this Master Lease and
each Equipment Schedule contain the entire agreement between Northstar
and Venturi with respect thereto. Neither this Master Lease nor any
Equipment Schedule may be altered, modified, terminated or discharged
except by a writing signed by the party against whom such alteration,
modification or discharge is sought.
(f) SEVERABILITY. Any provision of this Master Lease or any
Equipment Schedule prohibited by, or unlawful or unenforceable under,
any applicable law or any jurisdiction shall, at the sole option of
Northstar, be ineffective as to such jurisdiction without invalidating
the remaining provisions of this Master Lease; provided, however, that
to the extent that the provisions of any such applicable law can be
waived, they are hereby waived by Venturi.
(g) UNSPECIFIED FEATURES. If the Equipment delivered pursuant to
any Equipment Schedule contains any features not specified therein,
Venturi grants Northstar, at Northstar's option and Northstar's
expense, the right to remove or deactivate any of such features. Such
removal or deactivation shall be performed by the manufacturer or
another party reasonably acceptable to Venturi upon the request of
Northstar, at a time convenient to Venturi, provided that Venturi shall
not unreasonably delay the removal of such features.
(h) QUIET ENJOYMENT. Provided that no Event of Default has occurred
or is continuing hereunder, Northstar, Assignee or their agents or
assigns shall not interfere with Venturi's right of quiet enjoyment and
use of the Equipment.
(i) HEADINGS. Section headings are for convenience only and shall
not be construed as part of this Master Lease.
(j) SUCCESSORS. This Master Lease shall inure to and bind the
permitted successors and assigns of the respective parties.
(k) SUPPLIERS NOT AN AGENT OF NORTHSTAR. Venturi understands and
agrees that no manufacturer, seller or supplier of any of the
Equipment, nor any salesperson or other agent thereof, is an agent of
Northstar. No salesperson or agent of any manufacturer, seller or
supplier is authorized to waive or alter any term or condition of this
Master Lease, and no representation as to Equipment or any other matter
by any manufacturer, seller or supplier shall in any way affect
Venturi's duty to pay Rent and perform its other obligations as set
forth in this Master Lease.
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<PAGE> 10
(1) STATUTE OF LIMITATIONS. Any action by Venturi against Northstar
for any default by Northstar under this Master Lease, including breach
of warranty or indemnity, shall be barred unless commenced within one
(1) year after any such cause of action accrues.
(m) EXPENSES. All fees and expenses, including without limitation
attorneys' fees and filing fees, incurred by Northstar in connection
with the document preparation, due diligence, and closing of the
transactions contemplated in this Master Lease shall be paid by
Venturi; provided, however, that Venturi's obligations under this
provision shall not exceed, in the aggregate, Twenty-Five Thousand
Dollars ($25,000).
IN WITNESS WHEREOF, Northstar and Venturi have caused this Master Lease
to be duly executed as of the date first above written.
NORTHSTAR: VENTURI:
NORTHSTAR CAPITAL, LLC, VENTURI TECHNOLOGY ENTERPRISES, INC.,
a Utah limited liability company a Nevada corporation
By /s/ By /s/ Gaylord Karren
----------------------------- --------------------------------
Name: Name: Gaylord Karren
Title: Managing Partner Title: Chairman & CEO
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<PAGE> 1
EXHIBIT 5.0
[MACKEY PRICE & WILLIAMS LETTERHEAD]
July 29, 1998
Venturi Technologies, Inc.
1327 North State Street
Orem, Utah 84057
RE: VENTURI TECHNOLOGIES, INC.
REGISTRATION OF COMMON STOCK ON FORM SB-2
LEGALITY OF SECURITIES
Gentlemen:
This firm has acted as your counsel in connection with the
filing of a Registration Statement on Form SB-2 with the Securities and Exchange
Commission. The Registration Statement relates to an offering of up to
shares of the $0.001 par value Common Stock (the "Shares")
of Venturi Technologies, Inc., a Nevada corporation (the "Company"),
shares of which will be issued upon conversion of Series B Preferred Stock and
Series C Preferred Stock, and of which will be issued and sold by
the Company.
We have examined copies of the Articles of Incorporation, as
amended, that have been filed with the Delaware Secretary of State. We have also
examined such statutes and documents and have made such other investigation as
we have deemed necessary in connection with the opinion expressed herein.
Based upon the foregoing, we are of the opinion that the
Shares, when issued and sold, will be legally issued, fully paid, and
non-assessable.
/s/ MACKEY PRICE & WILLIAMS
<PAGE> 1
EXHIBIT 10.0
VENTURI TECHNOLOGY ENTERPRISES, INC.
A Nevada corporation
DUAL STOCK OPTION PLAN
(Incentive and Non-Statutory Options)
1. Preamble.
In July 1996, Venturi Technologies, Inc., a Texas corporation
("Venturi"), adopted a stock option plan to enhance the incentive of Venturi's
key employees, officers, directors and consultants to increase the success of
Venturi by giving them an ownership interest in Venturi, and to give them an
incentive to continue their service to Venturi. The Board of Directors of
Venturi allocated 2,000,000 shares of Venturi's no par value common stock to the
plan. The Board of Directors of Venturi granted several stock options under the
plan.
Venturi Technology Enterprises, Inc. (The "Company") is a
Nevada corporation that was created for the purpose of merging with Venturi. On
or about July 1, 1997, the Company merged with Venturi through a stock for stock
exchange. Pursuant to the stock for stock exchange, all shareholders of Venturi
became shareholders of the Company. The Company now desires to create a stock
option plan identical to the stock option plan previously adopted by Venturi,
and to grant stock options under the Company's plan to recipients of stock
options under Venturi's plan that are identical to the stock options granted
under Venturi's plan. Attached hereto as Exhibit "A" is a list of all of
Venturi's outstanding stock options that are intended to be replaced by stock
options under the Company's plan.
The Company's Stock Option Plan (the "Plan") consists of two
autonomous, separately administered programs: the "Employee Program" and the
"Consultant Program." The Employee Program is for all key employees (including
employees who are also directors of the Company or its subsidiaries). The
Consultant Program is for all consultants (including directors who are not also
employees of the Company). Stock Options granted under the Employee Program are
intended to be Incentive Stock Options as defined in Section 422 of the 1986
Internal Revenue Code, as amended (the "Code"), and Stock Options granted under
the Consultant Program are intended to be Non-Statutory Stock Options.
2. Stock Subject to Plan
The Company shall reserve 2,000,000 shares of its no par value
common stock (the "Shares") to be issued upon exercise of the options which may
be granted from time to time under this Plan. Of these shares, 1,500,000 shares
shall be allocated to the Employee Program and 500,000 shares shall be allocated
to the Consultant Program. As it may from time to time determine, the Board of
Directors of the Company (the "Board") may authorize that the Shares may be
comprised, in whole or in part, of authorized but unissued shares of the common
stock of the Company or of issued shares which have been reacquired. If options
<PAGE> 2
granted under the Plan terminate or expire before being exercised in whole or in
part, the Shares subject to those options which have not been issued may be the
subject of subsequent options granted under the Plan.
The Company does not presently intend to register the Plan or
the Shares with the Securities and Exchange Commission, and there is no
assurance that the Shares issued upon exercise of an option will ever be
registered or qualified under any federal or state securities law, nor is there
any assurance that any market will ever exist for the Shares issued upon
exercise of an option.
3. Administration of the Plan
The Board shall appoint a Stock Option Committee (hereinafter
called the "Committee") which shall consist of not less than two (2) members of
the Board, and which, at the election of the Board, may consist of the entire
Board, to administer the Employee Program. The full Board shall administer the
Consultant Program. Subject to the express provisions of the Plan and guidelines
which may be adopted from time to time by the Board, the Committee shall have
plenary authority in its discretion (a) to determine the individuals to whom,
and the time at which, options are granted, and the number and purchase price of
the Shares subject to each option; (b) to determine whether the options granted
shall be Incentive Stock Options within the meaning of the Code, or
Non-statutory Stock Options; (c) to interpret the Plan and prescribe, amend and
rescind rules and regulations relating to it; (d) to determine the terms and
provisions (and amendments thereof) of the respective option agreements subject
to Section 6 of the Plan, which need not be identical, including, if the
Committee shall determine that a particular option is to be an Incentive Stock
Option, such terms and provisions (and amendments thereof) as the Committee
deems necessary to provide for an Incentive Stock Option or to conform to any
change in any law, regulation, ruling or interpretation applicable to Incentive
Stock Options; and (e) to make any and all determinations which the Committee
deems necessary or advisable in administering the Plan. The Committee's
determination on the foregoing matters shall be conclusive. No Member of the
Committee shall be liable for any action taken or decision made in good faith
relating to the Plan or any award thereunder.
4. Persons Eligible.
Under the Employee Program, the Committee may grant Incentive
or Non-statutory Stock Options to executive officers and other key employees of
the Company or its subsidiaries who occupy responsible managerial or
professional positions and who have the capability of making a substantial
contribution to the success of the Company or its subsidiaries. In making this
selection and in determining the form and amount of awards, the Committee shall
consider any factors deemed relevant, including the individual's functions,
responsibilities, value of services to the Company or its subsidiaries, and past
and potential contributions to the Company's or its subsidiaries' profitability
and sound growth.
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<PAGE> 3
Under the Consultant Program, the Board may grant
Non-statutory Stock Options to consultants (including directors) of the Company
or its subsidiaries and may grant Incentive Stock Options to key employees of
the Company or its subsidiaries who are also directors. For this purpose,
"employee" shall conform to the requirements of Section 422 of the Code.
The aggregate fair market value (determined as of the time the
option is granted) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by an optionee during any calendar year
(under all incentive stock option plans of the Company or its subsidiaries)
shall not exceed $100,000.
5. Changes in Capital Structure
In the event of changes in the outstanding capital stock of
the Company by reason of any stock dividend, stock split or reverse split,
reclassification, recapitalization, merger, consolidation, reorganization or
liquidation, the Committee and/or the Board may make such adjustments in (a) the
aggregate number and class of shares available under the Plan; (b) the number
and class of shares to which optionees will thereafter be entitled upon exercise
of their options; and (c) the price which optionees shall be required to pay
upon such exercise; as it deems appropriate, and such determination shall be
final, binding and conclusive.
In the event of any merger of the Company (except with a
subsidiary) or any acquisition of 80 percent or more of its gross assets or
stock, or any reorganization or liquidation of the Company (an "Event"), the
Board shall make arrangements (the "Arrangements") which shall be binding upon
the holders of unexpired options then outstanding under this Plan (d) for the
substitution of new options for any portion of such unexpired options; (e) for
the assumption of any portion of such unexpired options by any successor to the
Company; (f) for the acceleration of the expiration date of any portion of such
unexpired options to a date not earlier than thirty (30) days after notice to
the optionee; or (g) for the cancellation of such portion of unexpired options
in exchange for the payment by any successor to the Company of deferred
compensation to the optionee in an amount equal to the difference between the
fair market value of the Shares subject to such unexpired portion and the
aggregate exercise price of the Shares under the terms of such unexpired portion
on the date of the Event, in installments which correspond to the vesting
schedule of the unexpired option.
Notwithstanding the foregoing, if an Event should occur, the
Arrangements which the Board shall make to each portion of all outstanding
unexercised options shall be limited to either (h) providing for the
substitution of new options for such portion; (i) providing the holder of such
portion with no less than thirty (30) days to exercise such portion in full; (j)
causing any successor corporation to assume such portion in full; or (k)
cancelling such portion and causing any successor corporation to pay deferred
compensation to the holder of such portion at the time such portion would have
become exercisable, in an amount equal to
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<PAGE> 4
the difference between the fair market value of the Shares subject to the
portion and the aggregate exercise price of the portion on the Date of the
Event.
6. Terms and Conditions of Options
Each option granted under this Plan shall be evidenced by a
stock option agreement (an "Agreement") which is not inconsistent with the terms
of this Plan, and the form of which the Committee and/or Board may from time to
time determine, provided that the Agreement shall contain the substance of the
following:
a. Option Price. The option price for Incentive Stock
Options shall be not less than 100% of the fair market value
of the Shares at the time the option is granted, which shall
be the date the Committee and/or Board, or its delegate,
awards the grant. If the optionee, at the time the option is
granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all the classes of stock of
the Company or of its parent or subsidiaries (a "Principal
Shareholder"), the option price of Incentive Stock Options
shall be not less than 110% of the fair market value of the
Shares at the time the option is granted. Determination of
fair market value shall be made by the Board and/or Committee
in good faith pursuant to the provisions of Section 422 of the
Code and the regulations thereto. The option price for
Non-statutory Options shall be as determined by the Board
and/or Committee in its sole discretion.
b. Method of Exercise. At the time of purchase,
Shares purchased under options shall be paid for in full
either (i) in cash; (ii) at the discretion of the Board, with
a promissory note secured by the Shares purchased; (iii) at
the discretion of the Committee and/or Board, with outstanding
stock of the Company at such value as the Board shall
determine in its sole discretion to be the fair market value
of such stock; or (iv) a combination of promissory note (if
permitted pursuant to (ii) above), stock (if permitted
pursuant to (iii) above), and/or cash. To the extent that the
right to purchase Shares has accrued under an option, the
optionee may exercise said option from time to time by giving
written notice to the Company stating the number of Shares
with respect to which the optionee is exercising the option,
and submitting with said notice payment of the full purchase
price of said Shares either in cash or, at the discretion of
the Board and/or Committee as described above, with a
promissory note, outstanding stock of the Company, or a
combination of cash, promissory note, and/or such stock. As
soon as practicable after receiving such notice and payment,
the Company shall issue or cause to be issued a certificate or
certificates representing such Shares. The Shares so issued
shall be out of authorized but unissued Shares or reacquired
Shares of the Company's capital stock, as the Board and/or
Committee, or its delegate, may elect. The time of such
delivery of a certificate or certificates representing the
Shares purchased may be postponed by the Company for such
period as may be required for it
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<PAGE> 5
with reasonable diligence to comply with such procedures as
may, in the opinion of counsel to the Company, be desirable in
view of federal and state laws, including corporate securities
laws and revenue and taxation laws. If the optionee (or other
person entitled to exercise the option) fails to accept
delivery of any or all of the number of Shares specified in
such notice upon tender of delivery of the certificate or
certificates representing them, the right to exercise the
option with respect to such undelivered Shares may be
terminated.
c. Option Term. The Committee and/or Board may grant
options for any term, but shall not grant any options for a
term longer than ten (10) years from the date the option is
granted (except in the case of an Incentive Stock Option
granted to a Principal Shareholder in which case the term
shall be no longer than five (5) years from the date the
option is granted). Each option shall be subject to earlier
termination as provided in this Section 6.
d. Exercise of Options. Each option granted under
this Plan shall be exercisable during such period and for such
number of Shares as shall be determined by the Committee
and/or Board as limited by the other provisions of this Plan.
e. Nonassignability of Option Rights. No option shall
be assignable or transferable by the optionee except by will
or by the laws of descent and distribution. During the life of
an optionee, the option shall be exercisable only by the
optionee.
f. Effect of Termination of Employment or Death or
Disability. In the event the optionee's employment with the
Company or its subsidiaries ceases during the optionee's life
for any reason, including retirement, any Incentive Stock
Option or unexercised portion thereof granted to an employee
optionee which is otherwise exercisable, shall terminate
unless exercised within a period of three (3) months after the
date on which such employment ceased, but in no event later
than the date of expiration of the option period. In the event
of the death or disability (as defined in the Code) of the
optionee while employed or within a period of three (3) months
after the date on which such employment ceases, any option or
unexercised portion thereof granted to the optionee, if
otherwise exercisable by the optionee at the date of death or
disability, may be exercised by the optionee or by the
optionee's personal representatives, heirs or legatees at any
time before the expiration of the earlier of the normal
expiration of the option or one year from the date on which
such employment ceased.
g. Rights of Optionee. An optionee shall have no
rights as a stockholder with respect to any Shares subject to
an option until the date of issuance of a stock certificate or
certificates to the optionee for such Shares. No adjustment
shall be made for dividends or other rights of which the
record date
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<PAGE> 6
is prior to the date such stock certificate is issued. Neither
this Plan, nor any action or agreement thereunder, shall
confer any rights of continued employment, any rights to
election or retention as an officer or director, or any rights
to serve as a consultant.
7. Use of Proceeds
The proceeds from the sale of stock pursuant to options
granted under the Plan shall constitute general funds of the Company.
8. Amendment of Plan
The Board may at any time amend the Plan, provided that no
amendment may affect any then outstanding options or any unexercised portions
thereof, and provided further that any such amendment increasing the number of
Shares reserved under the Plan, altering the employees or class of employee
eligible to be granted incentive stock options under the Plan, or amending this
Section 8, shall be subject to shareholder approval.
9. Effective Date and Termination of Plan
This Plan was adopted by the Board of Directors on July 1,
1997, and was approved by the holders of a majority of the shares of common
stock of the Company on July 1, 1997. The Board of Directors of Venturi adopted
its stock option plan on July __, 1996, and its shareholders approved the plan
on July ___, 1996. The Board may terminate this Plan at any time. If not earlier
terminated, the Plan shall terminate July ___, 2006. Termination of the Plan
will not affect rights and obligations theretofore granted and then in effect.
This Plan, the granting of any option hereunder, and the
issuance of stock upon the exercise of any option, shall be subject to such
approval or other conditions as may be required or imposed by any regulatory
authority having jurisdiction to issue regulations or rules with respect
thereto, including, without limitation, the States of Texas (state of
incorporation) or Utah (state of Company's principal place of business) and the
Securities and Exchange Commission.
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<PAGE> 1
EXHIBIT 10.1
VENTURI TECHNOLOGY ENTERPRISES, INC.
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement (the "Agreement") is
made and entered into as of the 1st day of January, 1997, by and between Venturi
Technology Enterprises, Inc., a Nevada corporation with its principal place of
business in Utah (the "Company"), and (the "Optionee"),
pursuant to the Employee Program of the Dual Stock Option Plan of the Company
(the "Plan") which reserves for issuance to persons serving the Company and its
subsidiaries as key employees certain shares of the Company's no par value
common stock (the "Common Stock"). This Option is granted to replace an
Incentive Stock Option granted to Optionee on July 1, 1996 (the "Effective
Date") by the Company's predecessor, Venturi Technologies, Inc., a Texas
corporation. Because this Option is a replacement option, the Effective Date for
purposes of this Agreement is the date the Option was originally granted by the
Company's predecessor. As used herein, the term "subsidiary" shall mean any
present or future corporation which would be a "subsidiary" of the Company as
that term is defined in Section 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code").
WHEREAS, the Company desires to carry out the purposes of the
Plan by affording the Optionee, who is a key employee and who began working for
the Company on (the "Hire Date"), an opportunity to purchase
shares of Common Stock by means of a grant of an incentive stock option, as
hereinafter provided;
NOW, THEREFORE, based upon the mutual covenants and conditions
contained herein, the parties hereto have agreed to and do hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee
the right and option (the "Option") to purchase all or any part of an aggregate
of shares of the Common Stock (such number being subject to adjustment
as provided in Section 7 hereof and hereinafter called the "Option Shares") on
the terms and conditions herein set forth. The Option is intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the Code.
2. Purchase Price. The purchase price of the Option Shares
shall be $2.40 per share, which price has been determined by the Stock Option
Committee appointed by the Board of Directors (the "Committee") to be not less
than 100% (or 110% if Optionee owns more than 10% of the outstanding Common
Stock of the Company as of the Effective Date) of the fair market value of said
shares as of the Effective Date.
3. Terms of Option. The Option shall automatically terminate
upon the date ten (10) years subsequent to the Effective Date, subject to
earlier termination as provided in Sections 5, 6 and 7 hereof, or when all of
the Option Shares have been acquired.
The Option may be exercised as to any or all of the available
Option Shares. The purchase price of the shares as to which the Option shall be
exercised shall be paid in full at time of exercise either in cash, or, subject
to the approval of the Board, by promissory note, in shares
<PAGE> 2
of the Company's stock, or a combination of cash, promissory note and/or shares
of the Company's stock. Except as provided in Sections 5 and 6 hereof, the
Option may not be exercised at any time unless the Optionee is then employed by
the Company or a subsidiary and shall have been continuously employed by the
Company or by a subsidiary since the Effective Date. The holder of the Option
shall not have any of the rights of a shareholder with respect to the Option
Shares as to which there has been no exercise of the Option.
4. Nontransferability. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and the Option
may be exercised, during the lifetime of the Optionee, only by the Optionee.
More particularly (but without limiting the generality of the foregoing), the
Option may not be assigned, transferred (except as otherwise provided herein),
pledged or hypothecated in any way, shall not be assignable by operation of law
and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect.
5. Termination of Employment. In the event that the Optionee's
employment with the Company or a subsidiary of the Company is terminated for any
reason, with or without cause, and whether at the initiative of the Optionee or
the Company, the Option may be exercised by the Optionee, to the extent that the
Optionee shall have been entitled to do so at the date of such termination, at
any time within three (3) months after such termination, but not after the
termination date provided in paragraph 3, above, at the end of which time the
Option shall terminate. Nothing in this Agreement shall confer upon the Optionee
any right to continue in the employ of the Company or any of its subsidiaries or
interfere in any way with the right of the Company or any such subsidiary to
terminate the Optionee's employment at any time.
6. Death or Disability of Optionee. If the Optionee shall die
or become disabled (as defined in Code Section 422(c)(6)) while employed by the
Company or one or more of its subsidiaries or within three (3) months after the
termination of such employment, the Option may be exercised (to the extent that
the Optionee shall have been entitled to do so at the date of the Optionee's
death or disability) by the Optionee (or the Optionee's personal
representatives, heirs or legatees) at any time within one (1) year after his
termination of employment, but not after the date on which the Option
automatically expires pursuant to Section 3 above, at the expiration of which
time the Option shall terminate.
7. Changes in Capital Structure. In the event of changes in
the outstanding capital stock of the Company by reason of any stock dividend,
stock split or reverse split, reclassification, recapitalization, merger,
consolidation, reorganization or liquidation, the Committee and/or the Board may
make such adjustments in (a) the aggregate number and class of shares available
under the Plan; (b) the number and class of shares to which optionees will
thereafter be entitled upon exercise of their options; and (c) the price which
optionees shall be required to pay upon such exercise; as it deems appropriate,
and such determination shall be final, binding and conclusive.
-2-
<PAGE> 3
In the event of any merger of the Company (except with a
subsidiary) or any acquisition of 80 percent or more of its gross assets or
stock, or any reorganization or liquidation of the Company (an "Event"), the
Board shall make arrangements (the "Arrangements") which shall be binding upon
the holders of unexpired options then outstanding under the Plan (d) for the
substitution of new options for any portion of such unexpired options; (e) for
the assumption of any portion of such unexpired options by any successor to the
Company; (f) for the acceleration of the expiration date of any portion of such
unexpired options to a date not earlier than thirty (30) days after notice to
the optionee; or (g) for the cancellation of such portion of unexpired options
in exchange for the payment by any successor to the Company of deferred
compensation to the optionee in an amount equal to the difference between the
fair market value of the Shares subject to such unexpired portion and the
aggregate exercise price of the Shares under the terms of such unexpired portion
on the date of the Event, in installments which correspond to the vesting
schedule of the unexpired option.
Notwithstanding the foregoing, if an Event should occur, the
Arrangements which the Board shall make to each portion of all outstanding
unexercised options shall be limited to either (h) providing for the
substitution of new options for such portion; (i) providing the holder of such
portion with no less than thirty (30) days to exercise such portion in full; (j)
causing any successor corporation to assume such portion in full; or (k)
cancelling such portion and causing any successor corporation to pay deferred
compensation to the holder of such portion at the time such portion would have
become exercisable, in an amount equal to the difference between the fair market
value of the Shares subject to the portion and the aggregate exercise price of
the portion on the Date of the Event.
8. Method of Exercising Option. Subject to the terms and
conditions of this Agreement, the Option may be exercised by written notice to
the Company at its main office. Such notice shall state the election to exercise
the Option and the number of shares in respect of which it is being exercised
and shall be signed by the person or persons so exercising the Option. Such
notice shall be accompanied by payment of the full purchase price of such
shares, and the Company shall deliver a certificate or certificates representing
such shares as soon as practicable after the notice shall be received. The
certificate or certificates for the shares as to which the Option shall have
been so exercised shall be registered in the name of the Optionee and shall be
delivered as provided above to or upon the written order of the person or
persons exercising the Option. In the event the Option shall be exercised
pursuant to Section 6 hereof, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option. All shares
that shall be purchased upon the exercise of the Option as provided herein shall
be fully paid and nonassessable.
The shares to be issued upon the exercise of options granted
under the Plan have not been registered with the Securities and Exchange
Commission, nor have they been registered or qualified under the laws of any
state. The notice exercising the Option shall be in a form satisfactory to the
Company, and shall affirm that the purchaser is acquiring the shares for the
purchaser's own account for investment and not for the purposes of resale or
distribution. The certificates for the shares shall be subject to any legend
condition imposed under the laws of any
-3-
<PAGE> 4
state. In addition, the certificate representing the shares shall be subject to
the following restrictions and all certificates representing said shares shall
bear a conspicuous legend containing said restrictions:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NEITHER SAID SHARES NOR ANY INTEREST THEREIN MAY BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
THE ACT AND QUALIFICATION UNDER THE LAW OR AN OPINION
OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO
SAID SALE OR OFFER.
9. Right of First Refusal.
A. Initiation of Right of First Refusal. Each time
the Optionee exercises the Option and acquires Option Shares until the initial
public offering of the Corporation's Capital Stock, the Optionee (which for
purposes of this Section 9 shall include the Optionee's heirs, executors,
administrators and transferees, and shall be referred to as the "Shareholder")
shall not sell, pledge, assign, or otherwise transfer such Option Shares without
first offering to the Corporation or its designees the right and option to
purchase said shares as provided hereinafter in this Section 9 (the "Right of
First Refusal"). Notwithstanding the above, the Optionee may sell or transfer
said Option Shares to the Optionee's spouse or children, or to a trustee or
custodian for the benefit of the Optionee or Optionee's spouse or children
without first offering said Option Shares to the Corporation or its designees,
provided such buyer or transferee agrees in writing to be bound by the
restrictions set forth in this Agreement, including the restrictions set for the
in this Section 9. In the event of a pledge or other hypothecation of the Option
Shares, then the Right of First Refusal shall come into existence at the time of
any sale or transfer of ownership of the Option Shares pursuant to the
foreclosure under such pledge or hypothecation, provides, however, that Optionee
may not pledge the Option Shares unless the pledge holder agrees in writing at
the time of the pledge to be bound by the Right of First Refusal as contained in
this Section 9 and to cause any proposed assignee or transferee of such pledge
to execute and deliver to the Corporation a similar writing prior to such
assignment or transfer.
B. Mechanics. Any Shareholder desiring to sell
any or all of the Option Shares during such time period shall give written
notice to the Secretary of the Corporation of the Shareholder's bona fide
intention to sell the Option Shares pursuant to a bona fide written offer of a
third party other than the Corporation (the "Proposed Purchaser"). The notice
shall include a photocopy of such written offer which shall specify the identity
of the Proposed Purchaser, the number of such Option Shares proposed to be sold
(hereinafter the "Offered Shares"), and the
-4-
<PAGE> 5
price and payment terms of the proposed offer to buy the Offered Shares. The
payment terms of the Proposed Purchaser to the Shareholder (and of the
Shareholder to the Corporation) must be cash, cash equivalent (a certificate of
deposit, shares of stock in a publicly traded company, and the like), or a
promissory note of the Proposed Purchaser payable on date(s) specified by
passage of time. The Corporation or its designees shall have the right and
option to purchase any and all of the Offered Shares, at the price and on the
payment terms specified in the Shareholder's notice, for a period of sixty (60)
days from receipt of said notice from the Shareholder. That is, such notice by
the Shareholder constitutes an irrevocable offer by the Shareholder to sell any
or all of the Offered Shares to the Corporation or its designees at the price
and payment terms specified in such notice for sixty days from the Corporation's
receipt of such notice.
The Corporation shall exercise its option by giving written
notice (the "Original Notice") stating the number of Offered Shares for which it
is exercising its option either by delivering such notice personally to the
Shareholder, or by depositing such notice in the United States Mail, postage
prepaid, and addressed to the Shareholder at the Shareholder's address appearing
in the Corporation's records. The Shareholder shall deliver certificates
representing the number of Offered Shares purchased by the Corporation or its
designees against payment for the account of the Shareholder of the purchase
price in compliance with the terms of the bona fide offer within thirty (30)
days of the option exercise notice.
Any offered Shares for which both the Corporation and its
designees fail to exercise their option as provided in this section, may be sold
by the Shareholder to the proposed Purchase within a period of ninety (90) days
following the end of the Corporation's sixty (60)-day option period specified
above, provided that (1) such sale is made at a price and on terms no more
favorable to the proposed Purchaser than those made available to the Corporation
and its designees under this section, (2) the Proposed Purchaser delivers a
written undertaking to the Secretary of the Corporation to be bound by the
restrictions on the Option Shares set forth in this Agreement, including the
restrictions set forth in this Section 9, and (3) the Corporation receives an
opinion of counsel reasonably satisfactory to it that the sale to the Proposed
Purchaser complies with applicable federal and state corporate securities laws.
Upon receipt of a writing from Shareholder and Proposed
Purchaser that the foregoing conditions have been satisfied and the purchase
price paid to the Shareholder by the proposed Purchasers, the Corporation shall
transfer the ownership of record to the Proposed Purchaser (and reissue the
certificate).
If within this ninety (90)-day period the Shareholder does not
enter into an agreement for such a sale of Offered Shares to the Proposed
Purchaser which is consummated within thirty (30) days of the execution thereof,
the Right of First Refusal shall be revived as to the Offered Shares which shall
not be sold or transferred unless the Shareholder first offers the Corporation
the right and option to repurchase any and all such Option Shares in accordance
with this section.
-5-
<PAGE> 6
Any transfer or purported transfer of the Option Shares or any
interest therein shall be null and void unless the terms and conditions of this
Section 9 are strictly observed and followed, or such terms and conditions are
waived by the Corporation's Board of Directors.
In addition to the legend described in Section 8 of this
Agreement, the Corporation is authorized to place the following conspicuous
legend on all certificates representing Option Shares:
THESE SHARES ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS,
INCLUDING A RIGHT OF FIRST REFUSAL, AS SET FORTH IN A
NON-STATUTORY STOCK OPTION AGREEMENT DATED ON
FILE WITH THE SECRETARY.
10. Disposition of Shares. The Optionee agrees to notify the
Company in writing of any sale or transfer of any Option Shares which takes
place either within two years from the Effective Date or within one year from
the transfer of Option Shares to the Optionee pursuant to exercise of the
Option. Such notice shall set forth the price and terms of any such sale or
transfer.
11. Plan. This Agreement shall be interpreted and construed so
that it is in compliance with the Plan and so that the Option qualifies as an
"incentive stock option" within the meaning of Section 422 of the Code. Any
terms herein which are in conflict with the terms of the Plan shall be modified
so that they are no longer in conflict with the Plan and said Section 422 of the
Code.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the Effective Date written above.
OPTIONEE:
VENTURI TECHNOLOGY ENTERPRISES, INC.
By:
---------------------------------
Its:
------------------------------
OPTIONEE:
By:
---------------------------------
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<PAGE> 1
EXHIBIT 10.2
VENTURI TECHNOLOGY ENTERPRISES, INC.
NON-STATUTORY STOCK OPTION AGREEMENT
This Non-Statutory Stock Option Agreement (the "Agreement")
made and entered into as of the 1st day of July, 1997, by and between Venturi
Technology Enterprises, Inc., a Nevada corporation with its principal place of
business in Utah (the "Company"), and Merril Littlewood (the "Optionee"),
pursuant to the Consultant Program of the Dual Stock Option Plan of the Company
(the "Plan") which reserves for issuance to persons serving the Company and its
subsidiaries as directors and consultants certain shares of the Company's no par
value common stock (the "Capital Stock"). As used herein, the term "subsidiary"
shall mean any present or future corporation which would be a "subsidiary
corporation" of the Company, as that term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended.
WHEREAS, the Company desires to carry out the purposes of the
Plan by affording the Optionee, who is a for the company, an
opportunity to purchase shares of Capital Stock by means of a grant of a
non-statutory stock option, as hereinafter provided;
NOW, THEREFORE, based upon the mutual covenants and conditions
contained herein, the parties hereto have agreed to and do hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee
the right and option (the "Option") to purchase all or any part of an aggregate
of shares of the Capital Stock (such number being subject to
adjustment as provided in Paragraph 6 hereof and hereinafter called the "Option
Shares") on the terms and conditions herein set forth.
2. Purchase Price. The purchase price of the Option Shares
shall be $ per share.
3. Terms of Option. The Option shall automatically terminate
upon the date years subsequent to the Effective Date, subject to
earlier termination as provided in Paragraph 5 hereof. The Board of Directors of
the Company in its sole discretion deems there to be satisfactory and sufficient
consideration for the grant of this Option taking into account, among other
factors, . The Option
may be exercised as to any or all of the available Option Shares. The purchase
price of the shares as to which the Option shall be exercised shall be paid in
full at the time of exercise either in cash, or, subject to the approval of the
Board, by promissory note, in shares of the Company's stock, or a combination of
cash, promissory note and/or shares of the Company's stock. The Optionee shall
not have any of the rights of a shareholder with respect to the shares covered
by the Option as to which there has been no exercise of the Option.
4. Nontransferability. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and the Option
may be exercised, during the lifetime of the Optionee, only by the Optionee.
More particularly (but without limiting the generality of
<PAGE> 2
the foregoing), the Option may not be assigned, transferred (except as provided
above), pledged or hypothecated in any way, shall not be assignable by operation
of law and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect.
5. Death or Disability of Optionee. If the Optionee shall die,
the Option may be exercised (to the extent that the Optionee shall have been
entitled to do so at the date of the Optionee's death) by the Optionee's
personal representatives, or appropriate heirs or legatees, at any time before
the date on which the Option automatically expires pursuant to Section 3 above,
at the expiration of which time the Option shall terminate.
6. Adjustments Upon Changes in Capital Structure. In the event
of changes in the outstanding capital stock of the Company by reason of any
stock dividend, stock split or reverse split, reclassification,
recapitalization, merger, consolidation, reorganization or liquidation, the
Board may make such adjustments in (a) the aggregate number and class of shares
available under the Plan; (b) the number and class of shares to which optionees
will thereafter be entitled upon exercise of their options; and (c) the price
which optionees shall be required to pay upon such exercise; as it deems
appropriate, and such determination shall be final, binding and conclusive.
In the event of any merger of the Company (except with a
subsidiary) or any acquisition of 80 percent or more of its gross assets or
stock, or any reorganization or liquidation of the Company (an "Event"), the
Board shall make arrangements (the "Arrangements") which shall be binding upon
the holders of unexpired options then outstanding under this Plan (d) for the
substitution of new options for any portion of such unexpired options; (e) for
the assumption of any portion of such unexpired options by any successor to the
Company; (f) for the acceleration of the expiration date of any portion of such
unexpired options to a date not earlier than thirty (30) days after notice to
the optionee; or (g) for the cancellation of such portion of unexpired options
in exchange for the payment by any successor to the Company of deferred
compensation to the optionee in an amount equal to the difference between the
fair market value of the Shares subject to such unexpired portion and the
aggregate exercise price of the Shares under the terms of such unexpired portion
on the date of the Event, in installments which correspond to the vesting
schedule of the unexpired option.
Notwithstanding the foregoing, if an Event should occur, the
Arrangements which the Board shall make to each portion of all outstanding
unexercised options shall be limited to either (h) providing for the
substitution of new options for such portion; (i) providing the holder of such
portion with no less than thirty (30) days to exercise such portion in full; (j)
causing any successor corporation to assume such portion in full; or (k)
canceling such portion and causing any successor corporation to pay deferred
compensation to the holder of such portion at the time such portion would have
become exercisable, in an amount equal to the difference between the fair market
value of the Shares subject to the portion and the aggregate exercise price of
the portion on the date of the Event.
-2-
<PAGE> 3
7. Method of Exercising Option. Subject to the terms and
conditions of this Agreement, the Option may be exercised by written notice to
the Company at its main office. Such notice shall state the election to exercise
the Option and the number of shares in respect of which it is being exercised
and shall be signed by the person or persons so exercising the Option. Such
notice shall be accompanied by payment of the full purchase price of such
shares, and the Company shall deliver a certificate or certificates representing
such shares as soon as practicable after the notice shall be received. In the
event the Option shall be exercised pursuant to Paragraph 5 hereof, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise the Option. The certificate or certificates for the shares as to
which the Option shall have been so exercised shall be registered in the name of
the Optionee and shall be delivered as provided above to or upon the written
order of the person or persons exercising the Option. All shares that shall be
purchased upon the exercise of the Option as provided herein shall be fully paid
and nonassessable.
The shares to be issued upon the exercise of options granted
under the Plan have not been registered with the Securities and Exchange
Commission, nor have they been registered or qualified under the laws of any
state. The notice exercising the Option shall be in a form satisfactory to the
Company, and shall affirm that the purchaser is acquiring the shares for the
purchaser's own account for investment and not for the purposes of resale or
distribution. The certificates for the shares shall be subject to any legend
condition imposed under the laws of any state. In addition, the certificate
representing the shares shall be subject to the following restrictions and all
certificates representing said shares shall bear a conspicuous legend containing
said restrictions:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NEITHER SAID SHARES NOR ANY INTEREST THEREIN MAY BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
THE ACT AND QUALIFICATION UNDER THE LAW OR AN OPINION
OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO
SAID SALE OR OFFER.
9. Income Tax. It is understood that the exercise of this
Option will be taxed as a non-statutory option. In particular, the Optionee will
realize ordinary income at the time of exercise equal to the difference between
the then fair market value of the shares purchased and the exercise price, and
the Company will be entitled to a compensation expense deduction in the same
amount.
10. Right of First Refusal.
-3-
<PAGE> 4
A. Initiation of Right of First Refusal. Each time the
Optionee exercises the Option and acquires Option Shares until the initial
public offering of the Corporation's Capital Stock, the Optionee (which for
purposes of this Section 10 shall include the Optionee's heirs, executors,
administrators and transferees, and shall be referred to as the "Shareholder")
shall not sell, pledge, assign, or otherwise transfer such Option Shares without
first offering to the Corporation or its designees the right and option to
purchase said shares as provided hereinafter in this Section 10 (the "Right of
First Refusal"). Notwithstanding the above, the Optionee may sell or transfer
said Option Shares to the Optionee's spouse or children, or to a trustee or
custodian for the benefit of the Optionee or Optionee's spouse or children
without first offering said Option Shares to the Corporation or its designees,
provided such buyer or transferee agrees in writing to be bound by the
restrictions set forth in this Section 10 and Section 8 of this Agreement. In
the event of a pledge or other hypothecation of the Option Shares, then the
Right of First Refusal shall come into existence at the time of any sale or
transfer of ownership of the Option Shares pursuant to the foreclosure under
such pledge or hypothecation, provides, however, that Optionee may not pledge
the Option Shares unless the pledge holder agrees in writing at the time of the
pledge to be bound by the Right of First Refusal as contained in this Section 10
and to cause any proposed assignee or transferee of such pledge to execute and
deliver to the Corporation a similar writing prior to such assignment or
transfer.
B. Mechanics. Any Shareholder desiring to sell any or
all of the Option Shares during such time period shall give written notice to
the Secretary of the Corporation of the Shareholder's bona fide intention to
sell the Option Shares pursuant to a bona fide written offer of a third party
other than the Corporation (the "Proposed Purchaser"). The notice shall include
a photocopy of such written offer which shall specify the identity of the
Proposed Purchaser, the number of such Option Shares proposed to be sold
(hereinafter the "Offered Shares"), and the price and payment terms of the
proposed offer to buy the Offered Shares. The payment terms of the Proposed
Purchaser to the Shareholder (and of the Shareholder to the Corporation) must be
cash, cash equivalent (a certificate of deposit, shares of stock in a publicly
traded company, and the like), or a promissory note of the Proposed Purchaser
payable on date(s) specified by passage of time. The Corporation or its
designees shall have the right and option to purchase any and all of the Offered
Shares, at the price and on the payment terms specified in the Shareholder's
notice, for a period of sixty (60) days from receipt of said notice from the
Shareholder. That is, such notice by the Shareholder constitutes an irrevocable
offer by the Shareholder to sell any or all of the Offered Shares to the
Corporation or its designees at the price and payment terms specified in such
notice for sixty days from the Corporation's receipt of such notice.
The Corporation shall exercise its option by giving written
notice (the "Original Notice") stating the number of Offered Shares for which it
is exercising its option either by delivering such notice personally to the
Shareholder, or by depositing such notice in the United States Mail, postage
prepaid, and addressed to the Shareholder at the Shareholder's address appearing
in the Corporation's records. The Shareholder shall deliver certificates
representing the number of Offered Shares purchased by the Corporation or its
designees against payment for the account of the Shareholder of the purchase
price in compliance with the terms of the bona fide offer within thirty (30)
days of the option exercise notice.
-4-
<PAGE> 5
Any offered Shares for which both the Corporation and its
designees fail to exercise their option as provided in this section, may be sold
by the Shareholder to the proposed Purchase within a period of ninety (90) days
following the end of the Corporation's sixty (60)-day option period specified
above, provided that (1) such sale is made at a price and on terms no more
favorable to the proposed Purchaser than those made available to the Corporation
and its designees under this section, (2) the Proposed Purchaser delivers a
written undertaking to the Secretary of the Corporation to be bound by the
restrictions on the Option Shares set forth in this Section 10 and Section 8 of
this Agreement, and (3) the Corporation receives an opinion of counsel
reasonably satisfactory to it that the sale to the Proposed Purchaser complies
with applicable federal and state corporate securities laws.
Upon receipt of a writing from Shareholder and Proposed
Purchaser that the foregoing conditions have been satisfied and the purchase
price paid to the Shareholder by the proposed Purchasers, the Corporation shall
transfer the ownership of record to the Proposed Purchaser (and reissue the
certificate).
If within this ninety (90)-day period the Shareholder does not
enter into an agreement for such a sale of Offered Shares to the Proposed
Purchaser which is consummated within thirty (30) days of the execution thereof,
the Right of First Refusal shall be revived as to the Offered Shares which shall
not be sold or transferred unless the Shareholder first offers the Corporation
the right and option to repurchase any and all such Option Shares in accordance
with this section.
Any transfer or purported transfer of the Option Shares or any
interest therein shall be null and void unless the terms and conditions of this
Section 10 are strictly observed and followed, or such terms and conditions are
waived by the Corporation's Board of Directors.
In addition to the legend described in Section 8 of this
Agreement, the Corporation is authorized to place the following conspicuous
legend on all certificates representing Option Shares:
THESE SHARES ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS,
INCLUDING A RIGHT OF FIRST REFUSAL, AS SET FORTH IN A
NON-STATUTORY STOCK OPTION AGREEMENT DATED JULY 1, 1997 ON
FILE WITH THE SECRETARY.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date written above, to be effective as of the Effective Date
written above.
OPTIONOR:
VENTURI TECHNOLOGY ENTERPRISES, INC.
-5-
<PAGE> 6
By:
---------------------------------------
Its:
------------------------------------
OPTIONEE:
-------------------------------------------
[Optionee]
-6-
<PAGE> 1
Exhibit 10.3
VENTURI TECHNOLOGY ENTERPRISES, INC.
NON-STATUTORY STOCK OPTION AGREEMENT
This Non-Statutory Stock Option Agreement (the "Agreement") made and
entered into as of the 1st day of July, 1997, by and between Venturi Technology
Enterprises, Inc., a Nevada corporation with its principal place of business in
Utah (the "Company"), and Merril Littlewood (the "Optionee"), pursuant to the
Consultant Program of the Dual Stock Option Plan of the Company (the "Plan")
which reserves for issuance to persons serving the Company and its subsidiaries
as directors and consultants certain shares of the Company's no par value common
stock (the "Capital Stock"). As used herein, the term "subsidiary" shall mean
any present or future corporation which would be a "subsidiary corporation" of
the Company, as that term is defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
WHEREAS, the Company desires to carry out the purposes of the Plan by
affording the Optionee, who is the Company's Chief Financial Officer, an
opportunity to purchase shares of Capital Stock by means of a grant of a
non-statutory stock option, as hereinafter provided;
NOW, THEREFORE, based upon the mutual covenants and conditions contained
herein, the parties hereto have agreed to and do hereby agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase all or any part of an aggregate of Four
Hundred Thousand (400,000) shares of the Capital Stock (such number being
subject to adjustment as provided in Paragraph 6 hereof and hereinafter called
the "Option Shares") on the terms and conditions herein set forth.
2. Purchase Price. The purchase price of the Option Shares shall be $0.01
per share.
3. Terms of Option. The Option shall automatically terminate upon the
date ten (10) years subsequent to the Effective Date, subject to earlier
termination as provided in Paragraph 5 hereof. The Board of Directors of the
Company in its sole discretion deems there to be satisfactory and sufficient
consideration for the grant of this Option taking into account, among other
factors, the services that Optionee has rendered to the Company. The Option may
be exercised as to any or all of the available Option Shares. The purchase price
of the shares as to which the Option shall be exercised shall be paid in full at
the time of exercise either in cash, or, subject to the approval of the Board,
by promissory note, in shares of the Company's stock, or a combination of cash,
promissory note and/or shares of the Company's stock. The Optionee shall not
have any of the rights of a shareholder with respect to the shares covered by
the Option as to which there has been no exercise of the Option.
<PAGE> 2
4. Nontransferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Optionee, only by the Optionee. More
particularly (but without limiting the generality of the foregoing), the Option
may not be assigned, transferred (except as provided above), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. Death or Disability of Optionee. If the Optionee shall die, the Option
may be exercised (to the extent that the Optionee shall have been entitled to do
so at the date of the Optionee's death) by the Optionee's personal
representatives, or appropriate heirs or legatees, at any time before the date
on which the Option automatically expires pursuant to Section 3 above, at the
expiration of which time the Option shall terminate.
6. Adjustments Upon Changes in Capital Structure. In the event of changes
in the outstanding capital stock of the Company by reason of any stock dividend,
stock split or reverse split, reclassification, recapitalization, merger,
consolidation, reorganization or liquidation, the Board may make such
adjustments in (a) the aggregate number and class of shares available under the
Plan; (b) the number and class of shares to which optionees will thereafter be
entitled upon exercise of their options; and (c) the price which optionees shall
be required to pay upon such exercise; as it deems appropriate, and such
determination shall be final, binding and conclusive.
In the event of any merger of the Company (except with a subsidiary) or any
acquisition of 80 percent or more of its gross assets or stock, or any
reorganization or liquidation of the Company (an "Event"), the Board shall make
arrangements (the "Arrangements") which shall be binding upon the holders of
unexpired options then outstanding under this Plan (d) for the substitution of
new options for any portion of such unexpired options; (e) for the assumption of
any portion of such unexpired options by any successor to the Company; (f) for
the acceleration of the expiration date of any portion of such unexpired options
to a date not earlier than thirty (30) days after notice to the optionee; or (g)
for the cancellation of such portion of unexpired options in exchange for the
payment by any successor to the Company of deferred compensation to the optionee
in an amount equal to the difference between the fair market value of the Shares
subject to such unexpired portion and the aggregate exercise price of the Shares
under the terms of such unexpired portion on the date of the Event, in
installments which correspond to the vesting schedule of the unexpired option.
Notwithstanding the foregoing, if an Event should occur, the Arrangements
which the Board shall make to each portion of all outstanding unexercised
options shall be limited to either (h) providing for the substitution of new
options for such portion; (i) providing the holder of such portion with no less
than thirty (30) days to exercise such portion in full; (j) causing any
successor corporation to assume such portion in full; or (k)
<PAGE> 3
canceling such portion and causing any successor corporation to pay deferred
compensation to the holder of such portion at the time such portion would have
become exercisable, in an amount equal to the difference between the fair
market value of the Shares subject to the portion and the aggregate exercise
price of the portion on the date of the Event.
7. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may be exercised by written notice to the Company at
its main office. Such notice shall state the election to exercise the Option
and the number of shares in respect of which it is being exercised and shall be
signed by the person or persons so exercising the Option. Such notice shall be
accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received. In the event the Option
shall be exercised pursuant to Paragraph 5 hereof, such notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the Option. The certificate or certificates for the shares as to which
the Option shall have been so exercised shall be registered in the name of the
Optionee and shall be delivered as provided above to or upon the written order
of the person or persons exercising the Option. All shares that shall be
purchased upon the exercise of the Option as provided herein shall be fully
paid and nonassessable.
The shares to be issued upon the exercise of options granted under the
Plan have not been registered with the Securities and Exchange Commission, nor
have they been registered or qualified under the laws of any state. The notice
exercising the Option shall be in a form satisfactory to the Company, and shall
affirm that the purchaser is acquiring the shares for the purchaser's own
account for investment and not for the purposes of resale or distribution. The
certificates for the shares shall be subject to any legend condition imposed
under the laws of any state. In addition, the certificate representing the
shares shall be subject to the following restrictions and all certificates
representing said shares shall bear a conspicuous legend containing said
restrictions:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES
NOR ANY INTEREST THEREIN MAY BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
THE ACT AND QUALIFICATION UNDER THE LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE OR OFFER.
-3-
<PAGE> 4
9. Income Tax. It is understood that the exercise of this Option will be
taxed as a non-statutory option. In particular, the Optionee will realize
ordinary income at the time of exercise equal to the difference between the then
fair market value of the shares purchased and the exercise price, and the
Company will be entitled to a compensation expense deduction in the same amount.
10. Right of First Refusal.
A. Initiation of Right of First Refusal. Each time the Optionee
exercises the Option and acquires Option Shares until the initial public
offering of the Corporation's Capital Stock, the Optionee (which for purposes of
this Section 10 shall include the Optionee's heirs, executors, administrators
and transferees, and shall be referred to as the "Shareholder") shall not sell,
pledge, assign, or otherwise transfer such Option Shares without first offering
to the Corporation or its designees the right and option to purchase said
shares as provided hereinafter in this Section 10 (the "Right of First
Refusal"). Notwithstanding the above, the Optionee may sell or transfer said
Option Shares to the Optionee's spouse or children, or to a trustee or
custodian for the benefit of the Optionee or Optionee's spouse or children
without first offering said Option Shares to the Corporation or its designees,
provided such buyer or transferee agrees in writing to be bound by the
restrictions set forth in this Section 10 and Section 8 of this Agreement. In
the event of a pledge or other hypothecation of the Option Shares, then the
Right of First Refusal shall come into existence at the time of any sale or
transfer of ownership of the Option Shares pursuant to the foreclosure under
such pledge or hypothecation, provides, however, that Optionee may not pledge
the Option Shares unless the pledge holder agrees in writing at the time of the
pledge to be bound by the Right of First Refusal as contained in this Section
10 and to cause any proposed assignee or transferee of such pledge to execute
and deliver to the Corporation a similar writing prior to such assignment or
transfer.
B. Mechanics. Any Shareholder desiring to sell any or all of the
Option Shares during such time period shall give written notice to the
Secretary of the Corporation of the Shareholder's bona fide intention to sell
the Option Shares pursuant to a bona fide written offer of a third party other
than the Corporation (the "Proposed Purchaser"). The notice shall include a
photocopy of such written offer which shall specify the identity of the
Proposed Purchaser, the number of such Option Shares proposed to be sold
(hereinafter the "Offered Shares"), and the price and payment terms of the
proposed offer to buy the Offered Shares. The payment terms of the Proposed
Purchaser to the Shareholder (and of the Shareholder to the Corporation) must
be cash, cash equivalent (a certificate of deposit, shares of stock in a
publicly traded company, and the like), or a promissory note of the Proposed
Purchaser payable on date(s) specified by passage of time. The Corporation or
its designees shall have the right and option to purchase any and all of the
Offered Shares, at the price and on the payment terms specified in the
Shareholder's notice, for a period of sixty (60) days from receipt of said
notice from the Shareholder. That is, such notice by the Shareholder
constitutes an irrevocable offer by the Shareholder to sell
-4-
<PAGE> 5
any or all of the Offered Shares to the Corporation or its designees at the
price and payment terms specified in such notice for sixty days from the
Corporation's receipt of such notice.
The Corporation shall exercise its option by giving written notice (the
"Original Notice") stating the number of Offered Shares for which it is
exercising its option either by delivering such notice personally to the
Shareholder, or by depositing such notice in the United States Mail, postage
prepaid, and addressed to the Shareholder at the Shareholder's address
appearing in the Corporation's records. The Shareholder shall deliver
certificates representing the number of Offered Shares purchased by the
Corporation or its designees against payment for the account of the Shareholder
of the purchase price in compliance with the terms of the bona fide offer
within thirty (30) days of the option exercise notice.
Any offered Shares for which both the Corporation and its designees fail
to exercise their option as provided in this section, may be sold by the
Shareholder to the proposed Purchase within a period of ninety (90) days
following the end of the Corporation's sixty (60)-day option period specified
above, provided that (1) such sale is made at a price and on terms no more
favorable to the proposed Purchaser than those made available to the
Corporation and its designees under this section, (2) the Proposed Purchaser
delivers a written undertaking to the Secretary of the Corporation to be bound
by the restrictions on the Option Shares set forth in this Section 10 and
Section 8 of this Agreement, and (3) the Corporation receives an opinion of
counsel reasonably satisfactory to it that the sale to the Proposed Purchaser
complies with applicable federal and state corporate securities laws.
Upon receipt of a writing from Shareholder and Proposed Purchaser that the
foregoing conditions have been satisfied and the purchase price paid to the
Shareholder by the proposed Purchasers, the Corporation shall transfer the
ownership of record to the Proposed Purchaser (and reissue the certificate).
If within this ninety (90)-day period the Shareholder does not enter into
an agreement for such a sale of Offered Shares to the Proposed Purchaser which
is consummated within thirty (30) days of the execution thereof, the Right of
First Refusal shall be revived as to the Offered Shares which shall not be sold
or transferred unless the Shareholder first offers the Corporation the right
and option to repurchase any and all such Option Shares in accordance with this
section.
Any transfer or purported transfer of the Option Shares or any interest
therein shall be null and void unless the terms and conditions of this Section
10 are strictly observed and followed, or such terms and conditions are waived
by the Corporation's Board of Directors.
In addition to the legend described in Section 8 of this Agreement, the
Corporation is authorized to place the following conspicuous legend on all
certificates representing Option Shares:
-5-
<PAGE> 6
THESE SHARES ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS, INCLUDING A RIGHT
OF FIRST REFUSAL, AS SET FORTH IN A NON-
STATUTORY STOCK OPTION AGREEMENT
DATED JULY 1, 1997 ON FILE WITH THE
SECRETARY.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date written above, to be effective as of the Effective
Date written above.
OPTIONOR:
VENTURI TECHNOLOGY ENTERPRISES, INC.
By:--------------------------------
Its:----------------------------
OPTIONEE:
-----------------------------------
MERRIL LITTLEWOOD
-6-
<PAGE> 1
Exhibit 10.4
REQUIREMENTS CONTRACT
AGREEMENT made 2/15/96, 1996, between DT ENTERPRISES, a California
proprietorship (the "Manufacturer"), and ACTION VENTURI, a Texas corporation
(the "Purchaser").
1. PURCHASE OF REQUIREMENTS. The Purchaser, desiring to purchase
Manufacturer's chemical carpet cleaning product known as "Carpet Details" (the
"PRODUCT"), shall purchase the PRODUCT from Manufacturer, for a period of ten
(10) years from the date hereof, with Purchaser's option to extend the term for
an additional ten (10) years, at the prices listed in the attached schedule of
Manufacturer's List Prices, in such quantity as shall satisfy the Purchaser's
entire requirements for product of this type during the term of this agreement.
2. MODIFICATION OF PURCHASE PRICE. The Manufacturer expressly reserves
the right to change its Manufacturer's List Prices, as set forth in the attached
schedule, including the stated list prices, extra charges, and rates and bases
of discount, if any, as it shall see fit from time to time, and the schedules of
Manufacturer's List Prices, in their amended form from time to time, shall be
part of this Agreement. However, the net invoice price to the Purchaser for the
PRODUCT shall be no greater than the price charged by the Manufacturer for the
PRODUCT during the same time to any other person who shall hereafter enter into
a similar agreement with the Manufacturer and who shall purchase the PRODUCT
thereunder in the same amounts and under the same conditions. Changes in the
schedules may be made by the Manufacturer without notice to the Purchaser other
than by the Manufacturer's regular printed notice to the trade announcing such
changes, and shall become effective as of the date specified in such printed
notice. In any event, the prices payable by the Purchaser shall be increased by
an amount equal to the taxes and charges which are now, or may hereafter be,
levied, imposed, or charged (whether by federal, state, municipal, or other
public authority) with respect to the sales of the PRODUCT hereunder. In the
event of an increase by the Manufacturer of the net price, the Purchaser may
upon five days' written notice to the Manufacturer terminate this agreement
without liability under this Agreement.
3. PAYMENT. The Purchaser shall pay each invoice not later than 10 days
from the date thereof (net ten days).
4. DELIVERIES. The Manufacturer is not required to supply the PRODUCT
in excess of the Purchaser's own requirements. If the Purchaser fails to pay any
invoice when due, the Manufacturer may suspend further deliveries until all
indebtedness of the Purchaser to it has been paid in full and, if such default
in payment shall continue for ten days or more, or if the Purchaser orders
PRODUCT in excess of its own requirements, the Manufacturer may terminate this
Agreement forthwith. If in the opinion of the Manufacturer the credit of the
Purchaser becomes impaired, then the Manufacturer may at any time suspend
further deliveries except for cash in advance. The Manufacturer shall not be
liable for any delays or failures in delivery due to circumstances beyond its
reasonable control.
5. TRANSPORTATION CHARGES. All PRODUCT listed in the attached Price
schedules will be sold and billed to the Purchaser F.O.B. Manufacturer's
manufacturing facility, with all transportation, insurance, and other costs
thereof to be paid by Purchaser.
6. RISK OF LOSS. All risk of loss for damage, destruction, or loss to a
shipment shall be borne exclusively by Purchaser. If the Purchaser desires the
assistance of the Manufacturer in filing claims for loss with any common
carrier, it must request such to Manufacturer in writing and report the details
of the loss to the Manufacturer within a reasonable time so as to enable the
Manufacturer to comply with the common carrier's claims requirements.
Manufacturer agrees to use its best efforts to accord Purchaser any such
assistance that it reasonably can, but Manufacturer shall in no way be
responsible for processing any such claims.
7. INSTALLMENT DELIVERIES. Nondelivery or default by the Manufacturer
as to any installment shall not be deemed a breach of this Agreement except as
to such installment. Such nondelivery or such default shall not relieve the
Purchaser from its obligation to accept and pay for any subsequent or prior
installment, even though such nondelivery or default substantially impairs the
value of this contract.
8. WAIVER. No term of this Agreement shall be deemed to have been
waived by the Manufacturer unless such waiver is in writing and signed by the
Manufacturer or its duly authorized representative.
9. DISCLAIMER. MANUFACTURER DOES NOT WARRANT THAT THE PRODUCTS ARE
MERCHANTABLE OR FIT FOR ANY PARTICULAR PURPOSE. THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES MADE BY MANUFACTURER WITH RESPECT TO THE PRODUCTS, EXCEPT AS
EXPRESSLY STATED IN THIS AGREEMENT.
<PAGE> 2
10. BINDING EFFECT. This Agreement shall be binding upon Manufacturer
and Purchaser, as well as their respective successors and assigns only when
signed by Manufacturer and Purchaser. This Agreement may not be assigned by
either party unless such assignment is consented to in advance in writing by the
other party.
11. CONFIDENTIALITY. Purchaser acknowledges that the PRODUCT is
composed of certain chemical compounds that are proprietary in nature and
comprise confidential trade secrets of Manufacturer. Purchaser agrees to keep
all the information, data & other material concerning the PRODUCT
("Information") secret, confidential and in the strictest confidence; to
disclose same only to officers and employees of Purchaser to whom such
Information must be disclosed for evaluation purposes; and to assume full
responsibility for any acts of said officers and employees which violate the
terms of this agreement. Purchaser further agrees on behalf of itself and each
officer and employee to whom disclosure is made not to copy or make copies of
any of the Information, nor any portion of it, and not to disclose to others nor
to commercially utilize any of the Information, except as authorized in writing
by Manufacturer. Purchaser agrees to return to Manufacturer any and all
documents or other material provided by Manufacturer in connection with the
PRODUCT upon demand by Manufacturer, and in any event upon termination of this
Agreement. Purchaser agrees not to "reverse engineer" the PRODUCT or otherwise
attempt to gain further knowledge of the chemical composition of the PRODUCT,
except with Manufacturer's prior written consent.
IN WITNESS WHEREOF the parties have executed this Agreement on the
respective dates set forth below.
DT ENTERPRISES
Date: 2/15/96 By /s/ Doyle L. Timmons
-------- --------------------
Doyle Timmons
ACTION VENTURI
Date: 2/15/96 By /s/ Gaylord Karren
-------- --------------------
Gaylord Karren, President
INDIVIDUALS:
/s/ Gaylord Karren 2/15/96
- --------------------------------------
Gaylord Karren Date
/s/ John Hopkins 2/13/96
- --------------------------------------
John Hopkins Date
/s/ Joel Karren 2/19/96
- --------------------------------------
Joel Karren Date
/s/ Edward Norton 2/19/96
- --------------------------------------
Edward Norton Date
/s/ Jason Karren 2/19/96
- --------------------------------------
Jason Karren Date
/s/ Blake Horrocks 2/13/96
- --------------------------------------
Blake Horrocks Date
/s/ Timothy E. Woodard 2/15/96
- --------------------------------------
Tim Woodard Date
/s/ Karyn Erickson 2/13/96
- --------------------------------------
Karyn Erickson Date
/s/ Bridget Whitmire 2/15/96
- --------------------------------------
Bridgett Whimire Date
/s/ Bill Thomas 2/13/96
- --------------------------------------
Bill Thomas Date
<PAGE> 3
CONFIDENTIAL INFORMATION AGREEMENT
In consideration of DT ENTERPRISES (through its officers, principals,
employees and/or sales agents) furnishing to the undersigned ("RECIPIENT")
certain confidential information regarding the business and operations of DT
Enterprises, including specifically the following: General & Technical
information regarding DT Enterprises, its Business, and that certain chemical
cleaning compound [as well as DT Enterprises' carpet & upholstery product(s)
pertaining thereto] known as "CARPET DETAILS", including without limitation the
Material Safety Data Sheet ("MSDS") relating to any such product(s)
(collectively referred to herein as the "Information"), RECIPIENT hereby accepts
such disclosure under the following terms and agrees as follows:
1. RECIPIENT agrees to keep all the Information secret confidential and
in the strictes confidence; to disclose same only to officers and employees of
RECIPIENT to whom said Information must be disclosed for evaluation purposes;
and to assume full responsibility for any acts of said officers and employees
which violate the terms of this agreement,
2. RECIPIENT further agrees on behalf of itself and each officer and
employee to whom disclosure is made not to copy or make copies of any of the
Information, nor any portion of it, and not to disclose to others nor to
commercially utilize any of the Information, except as authorized m writing by
DT Enterprises;
3. RECIPIENT agrees to return to DT Enterprises any and all documents
or other material provided by DT Enterprises in connection with the disclosure
hereunder upon conclusion of RECIPIENT's evaluation or upon demand by DT
Enterprises; and
4. RECIPIENT understands that the foregoing obligations shall remain in
effect for a period of five (5) years, but shall not apply to anything that is
already fully known to the undersigned or his/her company or that otherwise
becomes fully disclosed to the public by a lawful act of other than the
undersigned or his/her company, its officers and employees.
Execution of this Agreement incurs no obligation on either DT
Enterprises, or said RECIPIENT respecting any business joint venture, purchase
or sale of any interest in the Business of DT Enterprises, any investment by
Recipient in DT Enterprises or its Business, or any other similar arrangement.
RECIPIENT
ACTION VENTURI, a Texas corporation
Date: 2/15/96 By /s/ Gaylord Karren
--------- -------------------------
Gaylord Karren, President
INDIVIDUAL OFFICERS:
/s/ Gaylord Karren 2/15/96
- ------------------------------------------
Gaylord Karren Date
/s/ John Hopkins 2/13/96
- ------------------------------------------
John Hopkins Date
/s/ Joel Karren 2/19/96
- ------------------------------------------
Joel Karren Date
/s/ Edward Norton 2/19/96
- ------------------------------------------
Edward Norton Date
/s/ Jason Karren 2/19/96
- ------------------------------------------
Jason Karren Date
/s/ Blake Horrocks 2/13/96
- ------------------------------------------
Blake Horrocks Date
/s/ Timothy E. Woodard 2/15/96
- ------------------------------------------
Tim Woodard Date
/s/ Karyn Erickson 2/13/96
- ------------------------------------------
Karyn Erickson Date
/s/ Bridget Whitmire 2/15/96
- ------------------------------------------
Bridgett Whimire Date
/s/ Bill Thomas 2/13/96
- ------------------------------------------
Bill Thomas Date
<PAGE> 1
Exhibit 10.5
EXCLUSIVE USE AND PURCHASE AGREEMENT
THIS EXCLUSIVE USE AND PURCHASE AGREEMENT (this "Agreement")
is entered into as of the 5th day of May, 1998 by and between Primicide, LLC, a
Nevada limited liability company ("Primicide"), with its principal place of
business at 3760 S. Highland Dr. #500, Salt Lake City, Utah 84106, and Venturi
Technologies, Inc., a Nevada corporation ("Venturi"), with its principal place
of business at 1327 North State Street, Orem, Utah 84057.
RECITALS
WHEREAS, Primicide owns the proprietary information and
technology involved in the production of a water based substance called "EO
Water" ("EO Technology") and Primicide manufactures machines, tools and
equipment used to produce EO Water ("EO Equipment");
WHEREAS, Venturi is engaged in the business of cleaning
carpets and ventilation ducts, and desires to obtain the exclusive worldwide
rights to EO Technology and EO Equipment for use in the carpet and ventilation
duct cleaning industries;
WHEREAS, Primicide desires to grant to Venturi the exclusive
worldwide rights to the EO Technology and the EO Equipment for use in the carpet
and ventilation duct cleaning industries.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, Primicide and Venturi agree as follows:
1. GRANT OF EXCLUSIVE USE AND PURCHASE RIGHTS. Primicide
hereby grants to Venturi the exclusive worldwide rights to use and exploit the
EO Technology in the carpet and ventilation duct cleaning industries. Primicide
also hereby grants to Venturi the exclusive worldwide rights to purchase from
Primicide all EO Equipment to be used in the carpet and ventilation cleaning
industries. Venturi may sell or distribute the EO Equipment to other end users
or to dealers or resellers, as Venturi sees fit, provided that Venturi adheres
to the confidentiality provisions set forth in Section ___ of this Agreement.
All decisions and expenses as to the use, sales, marketing, advertising and
pricing of the EO Equipment shall be the sole responsibility of Venturi.
2. TERMS AND CONDITIONS OF SALES. Venturi shall, from time to
time, place orders with Primicide for machine in a manner mutually agreed upon,
and at wholesale prices to be mutually agreed upon. Within five (5) days after
receipt of an order, Primicide shall either accept or reject the order.
Primicide will ship machine as directed by Venturi within a commercially
reasonable period of time after its acceptance of an order.
<PAGE> 2
3. TERM. This Agreement is for an initial term of five (5)
years from the date of this Agreement. At the conclusion of the initial term,
this Agreement shall automatically continue in full force and effect, except
that the term shall be on a year to year basis. Either party may terminate this
Agreement "with cause" upon thirty (30) days written notice to the other party,
or "without cause" upon one hundred twenty (120) days written notice to the
other party.
4. REPRESENTATIONS AND WARRANTIES OF PRIMICIDE. Primicide
represents and warrants (a) that it owns or possesses all rights to use, sell or
license the EO Technology, including, but not limited to, all copyrights,
trademarks, service marks, service names, trade names, patents, patent rights,
licenses, trade secrets and other proprietary rights; (b) Primicide is not
infringing upon, or otherwise acting adversely to, any copyrights, trademarks,
trademark rights, service marks, service names, trade names, patents, patent
rights, licenses, trade secrets or other proprietary rights owned by any other
person or persons, and that there is no claim or action by any such person
pending, or to the knowledge of Primicide threatened, with respect thereto; (c)
Primicide has the full power and authority to enter into this Agreement, and (c)
Primicide has not previously granted to any other person or company rights to
the EO Technology or EO Equipment for use in the carpet and ventilation duct
cleaning industries.
5. DISCLAIMER. Nothing in this Agreement shall be deemed to be
a representation or warranty by Primicide of the validity of any of the EO
Technology or the accuracy, safety, or usefulness for any purpose of the EO
Technology and the EO Equipment, or any other technical information, techniques,
or practices at any time made available by Primicide. Primicide shall have no
liability whatsoever to Venturi or any other person for or on account of any
injury, loss or damage, of any kind or nature, sustained by, or any damage
assessed or asserted against, or any other liability incurred by or imposed upon
Venturi or any other person, arising out of or in connection with or resulting
from the use by Venturi of any of the EO Technology or EO Equipment.
6. RELATIONSHIP OF THE PARTIES. Venturi is an independent
contractor and is in no way an agent, franchisee or employee of Primicide, it
being expressly agreed that the only relationship created by this Agreement is
that of vendor/licensor and vendee/licensee. Primicide shall provide Venturi
with such reasonable commercial and technical assistance as requested from time
to time by Venturi or as Primicide deems necessary or appropriate to enable
Venturi to fully use the EO Technology and the EO Equipment and to perform its
obligations under this Agreement.
6. CONFIDENTIALITY. The parties each covenant and agree that
they shall at all times during the term of this Agreement, and for a period of
two (2) years after the termination or expiration of this Agreement, keep all
proprietary information and trade secrets of the other party confidential, and
that such proprietary information or trade secrets will not, without the prior
written consent of the other party, be disclosed to any third party in any
manner
- 2 -
<PAGE> 3
whatsoever, in whole or in part, and shall not be used either party or by its
employees, agents or representatives other than in connection with the purpose
of this Agreement.
7. INDEMNIFICATION. Venturi shall defend, indemnify and hold
harmless Primicide from any losses, liability, claims or expenses (including,
without limitation, reasonable attorney's fees) arising out of Venturi's use of
the EO Technology and EO Equipment. Primicide shall defend, indemnify and hold
harmless Venturi from any losses, liability, claims or expenses (including,
without limitation, reasonable attorney's fees) arising out of Primicide's
design, development, use or manufacture of the EO Technology and the EO
Equipment.
8. MISCELLANEOUS.
(a) ATTORNEYS FEES. In the event any legal action is
commenced to interpret or to enforce the terms of this Agreement or to recover
damages for the breach thereof, the party prevailing in any such action shall be
entitled to recover from the non-prevailing party all reasonable attorneys' fees
and costs incurred by the prevailing party.
(b) BINDING AGREEMENT. This Agreement shall supersede
all prior agreements between the parties and shall be binding upon and inure to
the benefit of the heirs, personal representatives, successors and assigns of
each of the parties hereto. This Agreement may not be assigned without express
written consent of the other party.
(c) NOTICES. All notices required or permitted under
this Agreement shall be in writing and shall be given by personal delivery,
facsimile, registered or certified mail, or by first class mail. If given by
personal delivery or facsimile, such notice shall be deemed to have been given
on the day delivered or faxed. If given by registered, certified or first class
mail, such notice shall be deemed to have been given three business days after
mailed. Any party may at any time change the place of receiving notice by giving
notice of such change of address to the other as provided for herein.
(d) SEVERABILITY; MODIFICATION. The invalidity of any
provision hereof shall not affect the validity of any other provision hereof.
This Agreement cannot be changed or modified orally, but only in writing
consented to by both parties.
(e) LAW TO APPLY; JURISDICTION. This Agreement shall
be construed and interpreted in the light of and in accordance with the law in
force in the State of Utah, as such law from time to time shall be in effect. In
the event of any litigation or arbitration relating to this Agreement, the
parties hereto agree that jurisdiction shall lie with the courts of the State of
Utah, it being agreed between the parties that such jurisdiction constitutes the
most convenient location for all the parties.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PRIMICIDE, LLC
A Nevada limited liability company
By: /s/ illegible signature
______________________________________
Its: General Manager
_________________________________
VENTURI TECHNOLOGIES, INC.
A Nevada corporation
By: /s/ Gaylord Karren
____________________________________
Its: CEO
_________________________________
- 4 -
<PAGE> 1
Exhibit 10.6
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS
CERTIFICATE. THIS OPTION MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO COUNSEL FOR
THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR
DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.
VENTURI TECHNOLOGY ENTERPRISES, INC.
PLACEMENT AGENT'S OPTION CERTIFICATE
THIS PLACEMENT AGENT'S OPTION CERTIFICATE (the "Option Certificate")
certifies that for value received, EQUITY SERVICES, LTD. (the "Holder"), is the
owner of this option (the "Option"), which entitles the Holder thereof to
purchase, commencing June 30, 1998 and before the Expiration Date (as defined
below) Fifty Thousand (50,000) shares (the "Option Shares") of fully paid and
non-assessable shares of common stock, $0.001 par value per share (the "Common
Stock"), of VENTURI TECHNOLOGY ENTERPRISES, INC., a Nevada corporation (the
"Company") at a purchase price of $3.00 per Option Share (the "Strike Price"),
in lawful money of the United States of America by bank or certified check,
subject to adjustment as hereinafter provided.
1. OPTION; PURCHASE PRICE.
This Option shall entitle the Holder hereof to purchase the Option
Share at the Strike Price. The Strike Price and the number of Option Shares
evidenced by this Option Certificate are subject to adjustment as provided in
Article 6.
2. EXERCISE; EXPIRATION DATE.
a. Exercise. This Option is exercisable, at the option of the Holder,
commencing on June 30, 1998, and before the Expiration Date (as defined below)
by delivering to the Company written notice of exercise (the "Exercise Notice"),
stating the number of Option Shares to be purchased thereby, accompanied by bank
or certified check payable to the order of the Company for the Option Shares
being purchased. Within ten (10) days of the Company's receipt of the Exercise
Notice accompanied by the consideration for the Option Shares being purchased,
the Company shall issue and deliver to the Holder a certificate representing the
Option Shares being purchased. In the case of exercise for less than all of the
Option Shares represented by this
PLACEMENT AGENT'S OPTION CERTIFICATE Page 1
<PAGE> 2
Option Certificate, the Company shall cancel this Option Certificate upon the
surrender hereof and shall execute and deliver a new Option Certificate for the
remaining balance of such Option Shares.
b. Termination. The term "Expiration Date" shall mean 5:00 p.m., Salt
Lake City, Utah time, on June ___, 2003 or if such date in the State of Utah
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Salt Lake City, Utah time, the next following day which in the State of
Utah is not a holiday or a day on which banks are authorized to close.
3. RESTRICTIONS ON TRANSFER.
a. Restrictions. This Option, and the Option Shares or any other
security issuable upon exercise of this Option may not be assigned, transferred,
sold or otherwise disposed of unless (i) there is in effect a registration
statement under the Securities Act of 1933, as amended (the "Act") covering such
sale, transfer or other disposition or (ii) the Holder furnishes to the Company
an opinion of counsel, reasonably acceptable to counsel for the Company, to the
effect that the proposed sale, transfer or other disposition may be effected
without registration under the Act, as well as other documentation incidental to
effected without registration under the Act, as well as other documentation
incidental to such sale, transfer or other disposition as the Company's counsel
shall reasonably request.
b. Legend. Any Option Shares issued upon the exercise of this Option
shall bear a legend in substantially the form as follows:
"The shares evidenced by this certificate were issued upon
exercise of an Option and may not be sold, transferred or
otherwise disposed of in the absence of an effective
registration statement under the Securities Act of 1933 (the
"Act") or an opinion of counsel, reasonably acceptable to
counsel for the Company, to the effect that the proposed sale,
transfer or disposition may be effectuated without
registration under the Act."
4. RESERVATION OF SHARES.
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of this Option, such number of shares of Common Stock as shall
then be issuable upon the exercise of this Option. The Company covenants that
all shares of Common Stock which shall be issuable upon exercise of this Option
shall be duly and validly issued, fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof.
PLACEMENT AGENT'S OPTION CERTIFICATE Page 2
<PAGE> 3
5. LOSS OR MUTILATION.
Upon receipt by the Company of evidence of the loss, theft, destruction
or mutilation of this Option Certificate and, in the case of loss, theft or
destruction, or indemnity reasonably satisfactory to the Company, or in the case
of mutilation, upon surrender and cancellation of the mutilated Option
Certificate, the Company shall execute and deliver in lieu thereof, a new Option
Certificate representing an equal number of Option Shares exercisable
thereunder.
6. ANTI-DILUTION PROVISIONS.
a. Number of Option Shares. The number of shares of Common Stock and
the Strike Price per Option Share pursuant to this Option shall be subject to
adjustment from time to time as provided for in this Section 6(a).
Notwithstanding anything contained herein, the aggregate Strike Price for the
total number of Option Shares issuable pursuant to this Option shall remain
unchanged. In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares of Common Stock into a different number of
shares (i.e. forward or reverse stock split), (i) the number of shares which the
Holder of this Option shall have been entitled to purchase pursuant to this
Option shall be increased or decreased in direct proportion to such increase or
decrease of shares, as the case may be, and (ii) the Strike Price per Option
Share (but not the aggregate Strike Price) in effect immediately prior to such
change shall be increased or decreased in inverse proportion to such increase or
decrease of shares, as the case may be.
b. Fractional Shares. No certificate for fraction shares shall be
issued upon the exercise of this Option, but in lieu thereof the Company shall
purchase any such fractional shares calculated to the nearest cent.
c. Rights of the Holder. The Holder of this Option shall not be
entitled to any rights of a shareholder of the Company in respect of any Option
Shares purchasable upon the exercise hereof until such Option Shares have been
paid for in full and issued to it. The Holder of this Option is exercised and
the Option Shares therefor exercised have been paid for in full. As soon as
practicable after such exercise, the Company shall deliver a certificate or
certificates for the number of full shares of Common Stock issuable upon such
exercise, to the person or persons entitled to receive the same.
7. REGISTRATION RIGHTS.
The Holder of this Option and the Option Shares issued upon exercise of
this Option will have "piggyback" registration rights beginning on the date of
execution of this Option Certificate. The terms of these registration rights
shall be as set forth in the Registration Rights Agreement
PLACEMENT AGENT'S OPTION CERTIFICATE Page 3
<PAGE> 4
by and between the Holder and the Company, in substantially the form attached
hereto as Exhibit "A".
8. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Option, represents and warrants to,
and covenants and agrees with, the Company as follows:
a. The Option is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
b. The Holder is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Act.
c. The Holder (i) is not a citizen or resident of the United States of
America, (ii) is not an entity organized under any laws of any state of the
United States of America and (iii) does not have any offices in the United
States of America.
9. MISCELLANEOUS.
a. Transfer Taxes; Expenses of Registration. The Company shall bear all
expenses incurred in connection with each registration pursuant to this Option
Certificate, excluding underwriters' discounts and commissions, but including,
without limitation, all registration, filing and qualification fees, word
processing, duplicating, printers' and accounting fees (including the expenses
of any special audits or "cold comfort" letters required by or incident to such
performance and compliance), exchange listing fees or National Association of
Securities Dealers fees, messenger and delivery expenses, all fees and expenses
of complying with securities or blue sky laws, fees and disbursements of counsel
for the Company. The selling Holder shall bear and pay the underwriting
commissions and discounts applicable to the Option Shares offered for their
account in connection with any registrations, filings and qualifications made
pursuant to this Option Certificate. The Holder shall pay any and all brokerage
fees and transfer taxes incidental to the sale or exercise of this Option or the
sale of the underlying shares issuable hereunder.
b. Notice. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express overnight
courier, registered first class mail, overnight courier, or telecopied,
initially to the address set forth below, and thereafter at such other address,
notice of which is given in accordance with the provisions of this Section 9b.
if to the Company:
PLACEMENT AGENT'S OPTION CERTIFICATE Page 4
<PAGE> 5
Venturi Technology Enterprises, Inc.
1327 N. State Street
Orem, Utah 84137
Attn: Gaylord Karren, President & CEO
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
with a copy (which shall not constitute notice) to:
Mackey, Price & Williams
900 First Interstate Plaza
170 South Main Street
Sale Lake City, Utah 84101-1655
Attn: Randy K. Johnson, Esq.
Telephone: (801) 575-5000
Telecopier: (801) 575-5006
if to ESL:
Equity Services, Ltd.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majurnder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if
PLACEMENT AGENT'S OPTION CERTIFICATE Page 5
<PAGE> 6
deposited with a nationally recognized, overnight courier service; when receipt
is acknowledged, if telecopied.
c. Governing Law. This Option Certificate shall be governed by, and
construed in accordance with, the laws of the State of Nevada, without reference
to its principles regarding conflicts of laws.
IN WITNESS WHEREOF, the Company has caused this Option Certificate to
be fully executed as of the date set forth below.
VENTURI TECHNOLOGY ENTERPRISES, INC.
By: /s/ Gaylord Karren
--------------------------------
GAYLORD KARREN, Chairman & CEO
ATTEST: /s/ illegible signature
-----------------------
Name:
Title: Secretary
Date: December 31, 1997
PLACEMENT AGENT'S OPTION CERTIFICATE Page 6
<PAGE> 7
FORM OF EXERCISE OF OPTION
The undersigned hereby elects to exercise this Option as to ___ shares
of Common Stock covered hereby. Enclosed herewith is a bank or certified check
in the amount of $____________.
Date: ______________ ________________________
Name:
Address:
Signature
Guarantor:_______________________
PLACEMENT AGENT'S OPTION CERTIFICATE Page 7
<PAGE> 1
Exhibit 10.7
AGREEMENT OF COLLATERAL
AGREEMENT made March ___ 1997, between Gaylord Karren, whose address
is: 1327 North State Street, Orem, Utah 84057, John Hopkins, whose address is
1327 North State Street, Orem, Utah 84057 (individually the "Pledgor" and
together the "Pledgors"), and HiTek Carpet Care, Inc., a Nevada corporation,
2920 North Green Valley Parkway, Building 3, Suite 321, Henderson, Nevada 89014
(the "Pledgee").
RECITALS
At the time of the execution of this Agreement the Pledgee loaned
Venturi Technologies, Inc., a Texas corporation (the "Borrower"), $100,000,
evidenced by the promissory note of the Borrower for such amount,
To induce the Pledgee to make the loan, the Pledgors have agreed to
pledge certain stock with the Pledgee as security for the Borrower's repayment
of the loan,
It is therefore agreed,
1. Pledge. In consideration of the sum of $100,000 loaned to the
Borrower by the Pledgee, receipt of which is acknowledged, the Pledgors hereby
grant a security interest to the Pledgee in instruments of the following
description: 1,214,500 common shares of Venturi Technologies, Inc., a Texas
corporation, represented by certificates numbered 1 and 2, duly endorsed in
blank and herewith delivered to Max C. Tanner (the "Escrow Agent"). The Pledgors
hereby appoint the Escrow Agent his attorney to arrange for the transfer of the
pledged shares on the books of Venturi Technologies, Inc., a Texas corporation,
to the name of the Pledgee. The Escrow Agent shall hold the pledged shares as
security for the repayment of the loan, and shall not encumber or dispose of the
shares except in accordance with the provisions of paragraph 8 of this
Agreement.
2. Dividends. During the term of this pledge, all dividends and other
amounts received by the Pledgee as a result of its record ownership of the
pledged shares shall be applied by it to the payment of the principal and
interest on the loan.
3. Voting rights. During the term of this pledge, and so long as the
Pledgors are not in default in the performance of any of the terms of this
Agreement or the Borrower is not in default in the payment of the principal or
interest of the loan, each Pledgor shall have the right to vote his pledged
shares on all corporate questions, and the Pledgee shall execute due and timely
proxies in favor of each Pledgor to this end.
4. Representations. Each Pledgor warrants and represents that there are
no restrictions upon the transfer of any of his pledged shares, other than may
appear on the face of the certificates, and that the Pledgor has the right to
transfer such shares free of any encumbrances and without obtaining the consents
of the other shareholders.
Page 1
<PAGE> 2
5. Adjustments. In the event that, during the term of this pledge, any
share dividend, reclassification, readjustment, or other change is declared or
made in the capital structure of the company which has issued the pledged
shares, all new, substituted, and additional shares, or other securities, issued
by reason of any such change shall be held by the Pledgee under the terms of
this Agreement in the same manner as the shares originally pledged hereunder.
6. Warrants and rights. In the event that during the term of this
pledge, subscription warrants or any other rights or options shall be issued in
connection with the pledged shares, such warrants, rights, and options shall be
immediately assigned by the Pledgee to the appropriate Pledgor, and if exercised
by the Pledgor all new shares or other securities so acquired by the Pledgor
shall be immediately assigned to the Pledgee to be held under the terms of this
Agreement in the same manner as the shares originally pledged hereunder.
7. Payment of loan. Upon payment by the Borrower at maturity of the
principal and interest of the loan, less amounts theretofore received and
applied by the Pledgee in reduction thereof, the Pledgee shall direct the Escrow
Agent to transfer to the appropriate Pledgor all the pledged shares and all
rights received by the Pledgee as a result of his record ownership thereof.
8. Extension to Repay loan. While there has been discussion and limited
due diligence on the part of HiTek regarding the feasibility and benefits of
acquiring Venturi, HiTek and Venturi acknowledge that no agreements or letters
of intent have been entered into with respect to an acquisition or merger. In
the event HiTek determines that it is not in the best interest of its
shareholders after due diligence to acquire Venturi by merger or stock exchange,
HiTek shall grant Venturi a 9 month extension within which to repay the $100,000
loan.
9. Default. In the event that the Pledgor or Pledgors default in the
performance of any of the terms of this Agreement, or the Borrower defaults in
the payment at maturity of the principal or interest of the loan, the Escrow
Agent shall automatically turn over to Pledgee all shares pledged hereunder and
such shares shall be the sole property of the Pledgee.
In witness whereof the parties have executed this Agreement. This
document may be executed in one or more counterparts, each of which shall be
deemed to be an original, and all of which together shall constitute a single
Agreement.
PLEDGEE:
HiTek Carpet Care, Inc.
a Nevada corporation
By: /s/ Darren Dixon
Darren Dixon, President
Page 2
<PAGE> 3
PLEDGOR(S):
--------------------------------
Gaylord Karren
--------------------------------
John Hopkins
Page 3
<PAGE> 1
Exhibit 10.8
PATENT APPLICATION ASSIGNMENT
Docket 1699B-22130
WHEREAS, I, JOHN M. HOPKINS, a citizen of the United States, residing
at 451 North 150 East, Orem, Utah 84057, have invented new and useful
improvements in a
CARPET AND UPHOLSTERY CLEANER
for which application is being made for Letters Patent, said application being
executed by me and filed March 18, 1996 and further being identified by S.N.
60/013,909.
WHEREAS, VENTURI TECHNOLOGY ENTERPRISES, INC., a corporation of the
State of Nevada, having a correspondence address of 1327 N. State, Orem, Utah
84057, is desirous of acquiring my entire right, title and interest in said
application and my Letters Patent which may issue thereon.
NOW THEREFORE, be it known by all whom it may concern that for and in
consideration of One Dollar ($1.00), the receipt of which is hereby
acknowledged, and other good and valuable consideration, I hereby assign to said
corporation, both in and for the territory of the United States of America and
the entire world, all my title and interest in and to said invention, patent
application and any patent which may issue thereon, including all divisions,
continuations, reissues, continuations-in-part and substitutions thereof, plus
all priority rights for patent applications foreign to the United States of
America.
I further hereby assign and transfer to said corporation whatever cause
of action I may have for past or present infringement of said invention,
together with the right to bring suit for any such infringement and to seek and
receive damages and other relief arising from any such infringement.
I HEREBY covenant and agree that I will at any time, upon the request
and at the expense of said corporation, execute and deliver any and all papers
and do all lawful acts that may be necessary or desirable to perfect the title
and said invention, applications and patents, and I authorize the Commissioner
of Patents and Trademarks to issue Letters Patent to said corporation.
IN TESTIMONY WHEREOF, I execute this Agreement on the 22nd day of
December, 1997.
/s/ John M. Hopkins
----------------------------------
JOHN M. HOPKINS
STATE OF UTAH
COUNTY OF UTAH
Before me personally appeared the above identified individual and
acknowledged the foregoing assignment to be his voluntary act and deed on the
22nd day of December, 1997.
/s/ Vickie F. Johnson
----------------------------------
[NOTARY PUBLIC] Notary Public in and for
State of Utah
My Commission Expires: 5-15-2001
<PAGE> 1
Exhibit 10.9
PATENT APPLICATION ASSIGNMENT
Docket 1699B-22130
WHEREAS, I, GAYLORD KARREN, a citizen of the United States, residing at
588 S. Oak Drive, Woodland Hills, Utah 84653, have invented new and useful
improvements in a
CARPET AND UPHOLSTERY CLEANER
for which application is being made for Letters Patent, said application being
executed by me and filed on March 18, 1996 and further being identified by S.N.
60/013,909.
WHEREAS, VENTURI TECHNOLOGY ENTERPRISES, INC., a corporation of the
State of Nevada, having a correspondence address of 1327 N. State, Orem, Utah
84057, is desirous of acquiring my entire right, title and interest in said
application and my Letters Patent which may issue thereon.
NOW THEREFORE, be it known by all whom it may concern that for and in
consideration of One Dollar ($1.00), the receipt of which is hereby
acknowledged, and other good and valuable consideration, I hereby assign to said
corporation, both in and for the territory of the United States of America and
the entire world, all my title and interest in and to said invention, patent
application and any patent which may issue thereon, including all divisions,
continuations, reissues, continuations-in-part and substitutions thereof, plus
all priority rights for patent applications foreign to the United States of
America.
I further hereby assign and transfer to said corporation whatever cause
of action I may have for past or present infringement of said invention,
together with the right to bring suit for any such infringement and to seek and
receive damages and other relief arising from any such infringement.
I HEREBY covenant and agree that I will at any time, upon the request
and at the expense of said corporation, execute and deliver any and all papers
and do all lawful acts that may be necessary or desirable to perfect the title
and said invention, applications and patents, and I authorize the Commissioner
of Patents and Trademarks to issue Letters Patent to said corporation.
IN TESTIMONY WHEREOF, I execute this Agreement on the 22nd day of
December, 1997.
/s/ Gaylord Karren
----------------------------------------
GAYLORD KARREN
STATE OF UTAH
COUNTY OF UTAH
Before me personally appeared the above identified individual and
acknowledged the foregoing assignment to be his voluntary act and deed on the
22nd day of December, 1997.
/s/ Vickie F. Johnson
----------------------------------------
Notary Public in and for
[NOTARY SEAL] State of Utah
My Commission Expires: 5-15-2001
<PAGE> 1
Exhibit 10.10
PATENT ASSIGNMENT
WHEREAS, I, JOHN M. HOPKINS, having a mailing address of 451 North 150
East, Orem, Utah 84057, have invented new and useful improvements in a
CARPET CLEANER
for which application was made for Letters Patent, said application being
executed by me and filed March 17, 1997 and further being identified by S.N.
08/819,153 wherein assignment was made erroneously to a non-existing Utah
corporation of Venturi Technologies, Inc.
WHEREAS, VENTURI TECHNOLOGY ENTERPRISES, INC., a corporation of the
state of Nevada, having a correspondence address of 1327 N. State, Orem, Utah
84057, is desirous of acquiring my entire right, title and interest in said
application and my Letter Patent which may issue thereon.
NOW THEREFORE, be it known by all whom it may concern that for and in
consideration of One Dollar ($1.00), the receipt of which is hereby
acknowledged, and other good and valuable consideration, I hereby assign to said
corporation, both in and for the territory of the United States of America and
the entire world, all my title and interest in and to said invention, patent
application and any patent which may issue thereon, including all priority
rights for patent applications foreign to the United States of America.
I further hereby assign and transfer to said corporation whatever cause
of action I may have for past or present infringement of said invention,
together with the right to bring suit for any such infringement and to seek and
receive damages and other relief arising from any such infringement.
I HEREBY covenant and agree that I will at any time, upon the request
and at the expense of said corporation, execute and deliver any and all papers
and do all lawful acts that may be necessary or desirable to perfect the title
and said invention, applications and patents, and I authorize the Commissioner
of Patents and Trademarks to issue Letters Patent to said corporation.
IN TESTIMONY WHEREOF, I execute this Agreement on the 22nd day of
December, 1997.
/s/ John M. Hopkins
---------------------------------
JOHN M. HOPKINS
STATE OF UTAH
COUNTY OF UTAH
Before me personally appeared the above-identified individual and
acknowledged the foregoing assignment to be his voluntary act and deed on the
22nd day of December, 1997.
/s/ Vickie F. Johnson
-----------------------------------
[NOTARY SEAL] Notary Public in and for
State of Utah
My Commission Expires: 5-15-2001
<PAGE> 1
Exhibit 10.11
Attorneys' Docket No. 1699B-22130
Small Business Concern: VENTURI TECHNOLOGY ENTERPRISES, INC.
Applicant: JOHN M. HOPKINS
Serial or Patent No: 08/819,153
Filed or Issued: 03/17/97
For: CARPET CLEANER
VERIFIED STATEMENT (DECLARATION) CLAIMING SMALL ENTITY
STATUS (37 CFR 1.9(f) AND 1.27(b)) SMALL BUSINESS CONCERN
I hereby declare that the herein-identified small business concern
qualifies as a small business concern as defined in 13 C.F.R. 121.3-18, and
reproduced in 37 C.F.R. 1.9(d), for purposes of paying reduced fees under
section 41(a) and (b) of Title 35, United States Code, in that the number of
employees of the concern, including those of its affiliates, does not exceed 500
persons. For purposes of this statement, (a) the number of employees of the
business concern is the average over the previous fiscal year of the concern of
the persons employed on a full-time, part-time or temporary basis during each of
the pay periods of the fiscal year, and (2) concerns are affiliates of each
other when either, directly or indirectly, one concern controls or has the power
to control the other, or a third party or parties controls or has the power to
control both.
I hereby declare that rights under contract or law have been conveyed
to and remain with the small business concern identified above with regard to
the invention, entitled CARPET CLEANER by Inventor(s) JOHN M. HOPKINS described
in:
[ ] the specification filed herewith.
[XX] the application identified above.
[ ] the patent identified above.
If the rights held by the above-identified small business concern are
not exclusive, each individual, concern or organization having rights to the
invention is listed below and no rights to the invention are held by any person,
other than the inventor(s), who could not qualify as a small business concern
under 37 C.F.R. 1.9(d) or a nonprofit organization under 37 C.F.R. 1.9(e).
I acknowledge the duty to file, in this application or patent,
notification of any change in status resulting in loss of entitlement to small
entity status prior to paying, or at the time of paying, the earliest of the
issue fee or any maintenance fee due after the date on which status as a small
entity is no longer appropriate. (37 C.F.R. 1.28(b))
I hereby declare that all statements made herein of my own knowledge
are true and that all statements made on information and belief are believed to
be true; and further that these statements were made with the knowledge that
willful false statements and the like so made are punishable by fine or
imprisonment, or both, under section 1001 of Title 18 of the United States Code,
and that such willful false statements may jeopardize the validity of the
application, any patent issuing thereon, or any patent to which this verified
statement is directed.
NAME AND TITLE OF PERSON SIGNING:
FULL NAME: John M. Hopkins Title: President
------------------------------------- ----------------------------
ADDRESS: 1327 N. State State, Orem, Utah 84057
---------------------------------------------------------------------
SIGNATURE: /s/John M. Hopkins Date: Dec 22, 1997
------------------------------------- ----------------------------
[ ] Individual [X] Small Business Concern [ ] Nonprofit Organization
<PAGE> 1
Exhibit 10.12
Attorneys' Docket No. 1699JB-24579
Applicant or Patentee: VENTURI TECHNOLOGY ENTERPRISES, INC.
Serial or Patent No: 08/895,686
Filed or Issued: 07/17/97
For: WATER HEATER
VERIFIED STATEMENT (DECLARATION) CLAIMING SMALL ENTITY
STATUS (37 CFR 1.9(f) AND 1.27(b)) SMALL BUSINESS CONCERN
I hereby declare that the herein-identified small business concern
qualifies as a small business concern as defined in 13 C.F.R. 121.3-18, and
reproduced in 37 C.F.R. 1.9(d), for purposes of paying reduced fees under
section 41(a) and (b) of Title 35, United States Code, in that the number of
employees of the concern, including those of its affiliates, does not exceed 500
persons. For purposes of this statement, (a) the number of employees of the
business concern is the average over the previous fiscal year of the concern of
the persons employed on a full-time, part-time or temporary basis during each of
the pay periods of the fiscal year, and (2) concerns are affiliates of each
other when either, directly or indirectly, one concern controls or has the power
to control the other, or a third party or parties controls or has the power to
control both.
I hereby declare that rights under contract or law have been conveyed
to and remain with the small business concern identified above with regard to
the invention, entitled WATER HEATER by Inventor(s) WILLIAM C. THOMAS and JIMMIE
L. RILEY, SR. described in:
[ ] the specification filed herewith.
[X] the application identified above.
[ ] the patent identified above.
If the rights held by the above-identified small business concern are
not exclusive, each individual, concern or organization having rights to the
invention is listed below and no rights to the invention are held by any person,
other than the inventor(s), who could not qualify as a small business concern
under 37 C.F.R. 1.9(d) or a nonprofit organization under 37 C.F.R. 1.9(e).
I acknowledge the duty to file, in this application or patent,
notification of any change in status resulting in loss of entitlement to small
entity status prior to paying, or at the time of paying, the earliest of the
issue fee or any maintenance fee due after the date on which status as a small
entity is no longer appropriate. (37 C.F.R. 1.28(b))
I hereby declare that all statements made herein of my own knowledge
are true and that all statements made on information and belief are believed to
be true; and further that these statements were made with the knowledge that
willful false statements and the like so made are punishable by fine or
imprisonment, or both, under section 1001 of Title 18 of the United States Code,
and that such willful false statements may jeopardize the validity of the
application, any patent issuing thereon, or any patent to which this verified
statement is directed.
NAME AND TITLE OF PERSON SIGNING:
FULL NAME: Gaylord Karren
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Title: CEO & Chairman
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ADDRESS: 1327 N. State, Orem, UT 84057
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SIGNATURE: /s/Gaylord Karren Date: 22 Dec 97
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[ ] Individual [X] Small Business Concern [ ] Nonprofit Organization
<PAGE> 1
Exhibit 10.15
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 17th day of February, 1998, by and between VENTURI TECHNOLOGY
ENTERPRISES, INC., a Nevada corporation ("Venturi"), and NORTHSTAR CAPITAL, LLC,
a Utah limited liability company ("Northstar"), individually, a "Party" and
collectively, the "Parties".
Recitals
A. Venturi and Northstar have entered into a Master Lease Agreement, dated as of
February 17, 1998 (the "Master Lease"), pursuant to which Northstar has agreed
to provide or arrange for funding of lease financing (the "Lease Financing") for
trucks and carpet-cleaning equipment, to be used by Venturi in its business, in
an amount up to Three Million Dollars ($3,000,000). Capitalized terms used but
not otherwise defined herein shall have the meanings given them in the Master
Lease.
B. The Master Lease provides for the funding of the Lease Financing in three
phases (each, a "Phase") of up to One Million Dollars ($1,000,000) each, subject
to certain conditions set forth in the Master Lease.
C. As consideration for Northstar's agreement to provide or arrange for the
Lease Financing, Venturi has agreed to issue to Northstar one or more warrants
(the "Warrants") to purchase shares of common stock in Venturi ("Shares").
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. WARRANTS. Subject to the terms and conditions of this Agreement, Venturi
hereby agrees to issue the Warrants, as follows;
a. Upon the date of the first Takedown in the first Phase of the Lease
Financing (the "Grant Date"), Venturi shall issue to Northstar a Warrant or
Warrants entitling Northstar to purchase Shares, the total number of which
shall be equal to six and one-quarter percent (6.25%) (or 388,820) of the
fully diluted shares, of common stock in Venturi, as set forth in the
capitalization table attached hereto as Exhibit B, at a strike price of $.50
per Share.
b. The Warrant shall provide that it may be exercised at any time prior to
and including the tenth (10th) anniversary of the Grant Date, and shall be in
substantially the form of Exhibit A, attached hereto and incorporated herein
by this reference.
c. At Northstar's option, a Warrant for a designated portion of the Warrant
Shares shall be issued to Franklin Leasing Company, an affiliate of Franklin
Funding, Inc., Northstar's assignee under the Master Lease.
2. REPRESENTATIONS OF VENTURI. Venturi represents and warrants that all
documents, information and data delivered by or on behalf of Venturi to
Northstar in connection with this Agreement, the Master Lease, any Equipment
Schedule or any other lease or financing documents or agreements are true and
complete in all material respects, Venturi further represents and warrants that
(i) no such document, information or data contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements made not misleading, and (ii) there is no fact
that Venturi has not disclosed to Northstar in writing that adversely affects
Venturi's condition or its ability to perform its obligations under this
Agreement or the Master Lease.
<PAGE> 2
Notwithstanding any right of Northstar to investigate fully the affairs of
Venturi and notwithstanding any knowledge of facts determined or determinable by
Northstar pursuant to such investigation or right of investigation, Northstar
may rely fully upon the representations, warranties and agreements of Venturi
contained in this Agreement and the Master Lease, and all such representations,
warranties and agreements shall survive the execution and delivery of this
Agreement, the closing hereof, and the exercise of the Warrant. Venturi further
represents and warrants that as of the closing of the transactions contemplated
herein and in the Master Lease, the fair market value of Venturi's common stock
is not less than $.50 per share.
3. REPRESENTATIONS OF NORTHSTAR. Northstar represents and warrants that it is
purchasing the Warrant and any Warrant Shares issued upon exercise thereof for
investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), or applicable state securities
laws. Northstar further represents that it understands that the Warrant and
Warrant Shares have not been registered under the Securities Act or applicable
state securities laws by reason of specific exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of Northstar's
investment intent as expressed herein. Northstar represents that the Warrant and
any Warrant Shares purchased upon exercise thereof must be held indefinitely
unless such securities are subsequently registered under the Securities Act and
all applicable state securities laws and regulations or an exemption from such
registration or qualification is available, and that Venturi is under no
obligation to register or qualify such securities except as set forth in the
Warrant between Venturi and Northstar. Notwithstanding, Northstar may assign any
or all of its rights in the Warrant to another entity.
4. LEGENDS. Northstar acknowledges and understands that the instruments
evidencing the Warrant and any certificates evidencing the Warrant Shares shall
bear the legends as specified in the Warrant in the form attached hereto.
5. GENERAL PROVISIONS
a. This Agreement represents the entire agreement between Venturi and
Northstar regarding the subject matter hereof, supersedes all prior
agreements and understandings between the Parties regarding the subject
matter hereof and may be amended or modified only by a writing signed by both
Parties.
b. This Agreement shall bind and benefit the successors, assigns, heirs,
executors and administrators of the Parties. Neither this Agreement nor any
portion hereof may be assigned by Venturi without the prior written consent
of Northstar, which consent may be withheld for any reason or no reason.
Venturi understands and agrees that Northstar may assign its right to receive
all or part of the Warrants to other entities.
c. This Agreement shall be governed in all respects by the laws of the State
of Utah, except to the extent that Nevada corporate law governs as a result
of the incorporation of Venturi in the State of Nevada, and all suits or
legal actions related to or arising from this Agreement shall be brought in
the courts of the State of Utah. Venturi hereby accepts jurisdiction in Utah
and agrees to accept service of process as if it were personally present and
served within the State of Utah.
d. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
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e. This Agreement is the result of arm's-length negotiations between, and has
been reviewed by, each Party and its counsel. Accordingly, this Agreement
shall be deemed to be the product of both Parties, and no ambiguity shall be
construed in favor of or against either Party.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first set forth above.
NORTHSTAR CAPITAL, LLC, VENTURI TECHNOLOGY ENTERPRISES, INC.,
a Utah limited liability company a Nevada corporation
By /s/ By /s/ Gaylord Karren
--------------------------------- ---------------------------------
Name: Name:
Title: Managing Partner Title: Chairman & CEO
(Signature illegible)
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<PAGE> 4
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE,
TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN
OPINION OF COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR
(iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
____________________
THIS CERTIFIES THAT, for value received, subject to the terms and conditions
set forth herein, NORTHSTAR CAPITAL, LLC, a Utah limited liability company, is
entitled to subscribe for and purchase from VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation (the "Company"), a number equal to 6.25% of the fully
diluted shares on the Grant Date, of Common Stock (the "Common Stock"), of the
Company at an exercise price of Fifty Cents ($.50) per share, subject to
adjustment as set forth herein (the "Exercise Price"). As used herein, the term
"Common Stock" shall mean the Company's presently authorized Common Stock, and
any stock into or for which such Common Stock may hereafter be converted or
exchanged, and the term "Grant Date" shall mean_____________________, 1998.
1. TERM. This Warrant is exercisable, in whole or in part, at any time and
from time to time from and after the Grant Date and prior to the tenth
anniversary date of the Grant Date.
2. METHOD OR EXERCISE; NET ISSUE EXERCISE.
2.1 METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. This Warrant may
be exercised by the holder hereof, in whole or in part and from time to time, by
either of the following, at the election of the holder hereof: (a) the surrender
of this Warrant (with the Notice of Exercise form attached hereto as Exhibit A-1
duly executed) at the principal office of the Company and by the payment to the
Company, by cash, check or cancellation of indebtedness, of an amount equal to
the Exercise Price per share multiplied by the number of Shares then being
purchased; or (b) if in connection with a sale of Shares pursuant to a
registered public offering of the Company's securities, the surrender of this
Warrant (with the Notice of Exercise form attached hereto as Exhibit A-2 duly
executed), which surrender may be made contingent upon the closing of such
offering, at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the Company
from the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the Exercise Price per share multiplied by the
number of Shares then being purchased. The person or persons in whose name(s)
any certificate(s) representing Shares shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the Shares represented
thereby (and such Shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised, in the event of any exercise of this Warrant, certificates for the
Shares so purchased shall be delivered to the holder hereof as soon as possible
and in any event within fifteen (15) days of receipt of such notice (or,
following, the Company's initial public offering, within three (3) days of
receipt of such notice) and, unless this
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<PAGE> 5
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible thereafter.
2.2 AUTOMATIC EXERCISE. To the extent this Warrant is not previously
exercised, and if the fair market value of one share of the Company's Common
Stock is greater then the Exercise Price then in effect, this Warrant shall be
deemed automatically exercised pursuant to Section 2.3 below (even if not
surrendered) immediately before its expiration. For purposes of such automatic
exercise, the fair market value of one share of the Company's Common Stock upon
such expiration shall be determined pursuant to Section 2.3 (b) below. To the
extent this Warrant or any portion thereof is deemed automatically exercised
pursuant to this Section 2.2, the Company agrees to promptly notify the holder
hereof of the number of Shares, if any, the holder hereof is to receive by
reason of such automatic exercise.
2.3. RIGHT TO CONVERT WARRANT INTO STOCK; NET ISSUANCE.
(a) In addition to and without limiting the rights of the holder
under the terms of this Warrant, the holder may elect to convert this Warrant or
any portion thereof (the "Conversion Right") into shares of Common Stock, the
aggregate value of which shares shall be equal to the value of this Warrant or
the portion thereof being converted. The Conversion Right may be exercised by
the holder by surrender of this Warrant at the principal office of the Company
together with notice of the holder's intention to exercise the Conversion Right,
in which event the Company shall issue to the holder a number of shares of the
Company's Common Stock computed using the following formula:
Y(A-B)
X - -------
A
Where: X = The number of shares of Common Stock to be issued to the holder.
Y = The number of shares of Common Stock purchasable under this Warrant.
A = The fair market value of one share of the Company's Common Stock.
B = Exercise Price (as adjusted to the date of such calculation).
(b) For purposes of this Section 2.3, the "fair market value" per
share of the Common Stock shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon the Company's initial public offering, and if the Company's
registration statement relating to such offering has been declared effective by
the Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering; or
(ii) If the Conversion Right is not exercised in connection with
and contingent upon the Company's initial public offering, then as follows:
(A) If the Common Stock is traded on a national securities
exchange or admitted to unlisted trading privileges on such an
exchange, or is listed on the National Market System (the "National
Market System") of The NASDAQ Stock Market
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<PAGE> 6
("NASDAQ"), the fair market value shall be the last reported sale price
of the Common Stock on such exchange or on the National Market System
on the last business day before the effective date of exercise of the
Conversion Right or if no such sale is made on such day, the mean of
the closing bid and asked prices for such day on such exchange or on
the National Market System;
(B) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the fair market value shall be the mean of
the last bid and asked prices reported on the last business day before
the date of the election (1) by NASDAQ or (2) if reports are
unavailable under clause (1) above by the National Quotation Bureau
Incorporated; and
(C) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and ask prices are not reported,
the fair market value shall be, at the option of the holder hereof,
either (1) the price per share related to the most recent transaction
in which shares of the Common Stock were sold by the Company, or (2)
the price per share which the Company could obtain from a willing buyer
for shares sold by the Company from authorized but unissued shares, as
such price shall be determined by mutual agreement of the Company and
the holder of this Warrant.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be
issued upon the exercise of this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the issue thereof. During the period
within which this Warrant may be exercised, the Company will at all times have
duly authorized and reserved, for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock. The Company shall pay
all documentary, stamp or other taxes that may be imposed with respect to the
issuance of this Warrant or any Shares acquired pursuant to the exercise hereof.
4. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as set forth in
Appendix I hereto upon the occurrence of certain events described therein. The
provisions of Appendix I are incorporated by reference herein with the same
effect as if set forth in full herein.
5. NOTICES OF RECORD DATE. In the event of any taking by the Company of
a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed merger or consolidation of the Company with or into any other
corporation, or any proposed sale, lease or conveyance of all or substantially
all of the assets of the Company, or any proposed liquidation, dissolution or
winding up of the Company, then, in connection with each such event, the Company
shall mail to the holder of this Warrant at least twenty (20) days prior written
notice of the date on which any such record is to be taken for the purpose of
such dividend, distribution, right(s) or vote of the shareholders. Each such
written notice shall specify the amount and character of any such dividend,
distribution or right(s), and shall set forth, in reasonable detail, the matter
requiring any such vote of the shareholders.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make
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a cash payment therefor based upon the per share fair market value of the Common
Stock on the date of exercise.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF
WARRANT OR SHARES OF COMMON STOCK.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this
Warrant, by acceptance hereof, agrees that this Warrant and the Shares to be
issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant or any Shares
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the Securities Act. This Warrant and all Shares issued
upon exercise of this Warrant (unless registered under the Securities Act) shall
be stamped or imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.
(b) DISPOSITION OF WARRANT AND SHARES. With respect to any
offer, sale or other disposition of this Warrant, in whole or in part, or any
Shares acquired pursuant to the exercise of this Warrant prior to registration
thereof, the holder hereof and each subsequent holder of this Warrant agrees to
give written notice thereof to the Company prior thereto, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Securities Act as then
in effect or any federal or state law then in effect) of this Warrant (or any
portion hereof) or such Shares and indicating whether or not under the
Securities Act certificates for this Warrant (or any portion hereof) or such
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to insure compliance with
the Securities Act. Any assignment or transfer of this Warrant, in whole or in
part, shall include delivery to the Company of the Assignment Form attached
hereto as Exhibit A-3 duly endorsed. Each certificate representing this Warrant
(or any portion hereof) or the Shares thus transferred (except a transfer
pursuant to Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act unless, in
the aforesaid opinion of counsel for the holder, such legend is not required in
order to insure compliance with the Securities Act. Nothing herein shall
restrict the transfer of this Warrant (or any portion hereof) by the initial
holder hereof to any person or entity affiliated with the initial holder,
provided such transfer may be made in compliance with applicable federal and
state securities laws. The Company may issue stop transfer instructions to its
transfer agent in connection with the foregoing restrictions.
8. RIGHTS AS SHAREHOLDERS; INFORMATION.
8.1 SHAREHOLDER RIGHTS. Except as set forth herein, no holder
of this Warrant, as such, shall be entitled to vote upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or be
deemed the holder of Common Stock until this Warrant shall have been exercised
and the Shares purchasable upon such exercise shall have become deliverable, as
provided herein.
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<PAGE> 8
8.2 FINANCIAL STATEMENTS AND INFORMATION. The Company shall
deliver to the holder hereof (i) within one-hundred-twenty (120) days after the
end of the fiscal year of the Company, a consolidated balance sheet of the
Company as of the end of such year and a consolidated statement of income, cash
flows and shareholders' equity for such year, which year-end financial reports
shall be in reasonable detail and certified by independent public accountants of
nationally recognized standing selected by the Company, and (ii) within
forty-five (45) days after the end of each fiscal quarter (other than the last
fiscal quarter), unaudited consolidated statements of income and cash flows for
such quarter and a consolidated balance sheet as of the end of such quarter,
certified by the Company's chief financial officer. In addition, the Company
shall deliver on a timely basis to the holder hereof any and all other
information or data of any kind whatsoever provided generally to the
shareholders of the Company or reasonably requested by the holder hereof from
time to time.
9. REGISTRATION RIGHTS. The rights of the holder of this Warrant and
the obligations of the Company with respect to registration under the Securities
Act and the applicable rules and regulations thereunder shall be as set forth in
Appendix II hereto, the provisions of which are incorporated by reference herein
with the same effect as if set forth in full herein.
10. ADDITIONAL RIGHTS.
10.1 SECONDARY SALES. The Company agrees to assist the holder of
this Warrant in obtaining liquidity if opportunities to make secondary sales of
the Company's securities become available. To this end, the Company will
promptly provide the holder of this Warrant with notice of any offer to acquire
from the Company's security holders more than five percent (5%) of the total
voting power of the Company.
10.2 MERGERS. The Company agrees to provide the holder of this
Warrant with at least thirty (30) days' notice of the terms and conditions of
any proposed transaction, in which the Company would (i) sell, lease, exchange,
convey or otherwise dispose of all or substantially all of its property or
business, or (ii) merge into or consolidate with any other corporation (other
than a wholly-owned subsidiary of the Company), or effect any transaction
(including a merger or other reorganization) or series of related transactions,
in which more then fifty percent (50%) of the voting power of the Company is
disposed of.
11. REPRESENTATIONS AND WARRANTIES. This Warrant is issued and
delivered on the basis of the following representations and warranties made by
the Company:
(a) This Warrant has been duly authorized, executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms;
(b) The Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted
to or imposed upon the Shares and the holders thereof are as set forth in the
Company's Articles of Incorporation, as amended (the "Articles"), and the
Company's Bylaws, as amended (the "Bylaws"), true and complete copies of which
have been delivered to the original holder of this Warrant;
(d) As of the Grant Date, the capitalization of the Company is as
set forth in the Capitalization Schedule attached hereto as Appendix III, which
indicates the following: (i) the authorized capital stock of the Company
(including the authorized number of shares of Common Stock
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<PAGE> 9
and each series of Preferred Stock, if any); (ii) the number of shares of Common
Stock and each series of Preferred Stock issued and outstanding; (iii) the
number of shares of Common Stock reserved for issuance upon conversion of any
Preferred Stock; (iv) the number of shares for which options have been granted
under any stock option plan or other similar plan maintained by the Company; and
(v) any other securities that are convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for Common Stock or such
convertible or exchangeable securities, and the number of shares of Common Stock
issuable upon any conversion, exchange or exercise of such securities, options
or rights. All issued and outstanding shares of the Company's Common Stock and
Preferred Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth in Appendix III, there are no outstanding
rights, options, warrants, conversion rights, preemptive rights, rights of first
refusal or similar rights for or understandings relating to the purchase or
acquisition from the Company of any securities of the Company.
(e) The execution and delivery of this Warrant, the issuance of
the Shares upon exercise of this Warrant in accordance with the terms hereof and
the compliance by the Company with the provisions hereof (i) are not and will
not be inconsistent with the Company's Articles or Bylaws, (ii) do not and will
not contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and (iii) do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is bound or
require the consent or approval of, the giving of notice to, the registration
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or any other person or entity.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or sent to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the signature
page of this Warrant and shall be deemed recalled by the holder upon the earlier
of actual receipt or, if sent by certified mail (postage pre-paid), five (5)
days after deposit in the U.S. mail.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation, acquisition of
all or substantially all of the Company's assets or otherwise. All of the
obligations of the Company relating to the Shares shall survive the exercise and
termination of this Warrant. All of the covenants and agreements of the Company
shall inure to the benefit of the successors and assigns of the holder hereof.
The Company will, at the time of the exercise of this Warrant, in whole or in
part, upon request of the holder hereof but at the Company's expense,
acknowledge in writing its continuing obligation to the holder hereof in respect
of any rights (including, without limitation, any right to registration of the
Shares in accordance with Appendix II) to which the holder hereof shall continue
to be entitled after such exercise in accordance with this Warrant; provided,
that the failure of the holder hereof to make any such request shall not affect
the continuing obligation of the Company to the holder hereof in respect of such
rights.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate issued upon exercise hereof and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate,
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the Company shall make and deliver a new Warrant or stock certificate, or like
tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock
certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. RECOVERY OF LITIGATION COSTS. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
18. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Utah.
Date: February 17, 1998 VENTURI TECHNOLOGY ENTERPRISES, INC., a
Nevada corporation
By_____________________________________
Name:
Title:
Address:
1327 North State Street
Orem, Utah 84057
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<PAGE> 11
EXHIBIT A-1
NOTICE OF EXERCISE
To:__________________________
(COMPANY NAME)
1. The undersigned hereby:
[ ] elects to purchase ______ shares of Common Stock of the
Company pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such
shares in full; or
[ ] elects to exercise its net issuance rights pursuant to
Section 2.3 of the attached Warrant with respect to _______
shares of Common Stock.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or
names as are specified below:
_______________________
(NAME)
_______________________
(ADDRESS)
_______________________
(ADDRESS)
3. The undersigned represents that the aforesaid shares being
acquired for the account of the undersigned are for investment and not with a
view to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
________________________
(Date)
______________________________
(SIGNATURE)
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<PAGE> 12
EXHIBIT A-2
NOTICE OF EXERCISE
To:____________________________
(COMPANY NAME)
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement on Form S-___, filed on ______________, 19__, the
undersigned hereby:
[ ] elects to purchase ______ shares of Common Stock of the
Company (or such lesser number of shares as may be sold on
behalf of the undersigned at the Closing) pursuant to the
terms of the attached Warrant; or
[ ] elects to exercise its net issuance rights pursuant to
Section 2.3 of the attached Warrant with respect to _______
shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such ______ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
________________________
(Date)
___________________________________
(SIGNATURE)
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<PAGE> 13
EXHIBIT A-3
ASSIGNMENT FORM
To Be Executed by the Holder in order
to Assign or Transfer Warrant
FOR VALUE RECEIVED, the undersigned holder of the attached Warrant
hereby sells, assigns and transfers unto:
__________________________________
__________________________________
__________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS)
Please insert social security or other identifying number:
__________________________________
the right represented by such Warrant to purchase _______ shares of Common Stock
of the Company, represented by the attached Warrant, and hereby irrevocably
constitutes and appoints __________ Attorney to make such transfer on the books
of the Company, with full power of substitution in the premises.
________________________
(Date)
___________________________________
(SIGNATURE)
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<PAGE> 14
APPENDIX I
ADJUSTMENT PROVISIONS
1. CAPITALIZED TERMS. Capitalized terms used in this Appendix I that
are not otherwise defined herein shall have the respective meanings assigned to
them in the Warrant, dated as of _____________, 199__, to which this Appendix I
is attached, if therein defined.
2. ADJUSTMENT OF EXERCISE PRICE UPON ISSUANCE OF ADDITIONAL STOCK.
The Exercise Price shall be subject to adjustment from time to time as follows:
(a) Upon each issuance by the Company of any Additional Stock
without consideration or for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance of such Additional Stock, the
Exercise Price in effect immediately prior to each such issuance shall forthwith
(except as otherwise provided in this Section 2) be adjusted to a price
determined by multiplying the Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding or deemed to be
outstanding immediately prior to such issuance plus the number of shares of
Additional Stock which could be purchased were the then Exercise Price used
instead (calculated by dividing the total consideration to be received by the
Company in such issuance by the then Exercise Price) and the denominator of
which shall be the number of shares of Common Stock outstanding or deemed to be
outstanding immediately prior to such issuance plus the number of Shares of such
Additional Stock issued in such issuance. For purposes of this Section 2, the
number of shares of Common Stock outstanding or deemed to be outstanding shall
include the aggregate number of shares of Common Stock and Common Stock actually
outstanding.
(b) No adjustment of the Exercise Price shall be made in an amount
less then one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
one (1) year from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of one (1) year from the date of
the event giving rise to the adjustment being carried forward. Except to the
limited extent provided for in subsections 2(d)(iii) and 2(d)(iv) below, no
adjustment of the Exercise Price pursuant to subsection 2(a) of this Appendix I
shall have the effect of increasing the Exercise Price above the Exercise Price
in effect immediately prior to such adjustment.
(c) In the case of issuance by the Company of Additional Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in good
faith by the Board of Directors of the Company.
(d) In the case of the issuance (whether before, on or after the
Grant Date) of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
Section 2:
(i) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (to the extent then exercisable) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in a manner consistent with subsection
2(c) of this Appendix I), if any, received by the Company upon issuance of such
options or rights plus the minimum exercise price provided in such options or
rights (without taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
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<PAGE> 15
(ii) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for (to the extent then
convertible or exchangeable) convertible or exchangeable securities or upon
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Company (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in a manner consistent with subsection 2(c) of this Appendix I).
(iii) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to the Company upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including but not limited to, a change
resulting from antidilution provisions thereof, the Exercise Price, to the
extent in any way affected by or computed using such options, rights or
securities, shall be adjusted based upon the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(iv) Upon the expiration of any such options or rights,
the termination of any such options or rights to convert or exchange, or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Exercise Price, to the extent in any way affected by or computed
using such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights related to such securities.
(v) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 2(d)(i) and
2(d)(ii) of this Appendix I shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either subsection
2(d)(iii) or 2(d)(iv) hereof.
(e) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 2(d) of this
Appendix I) by the Company after the Grant Date other than:
(i) Shares of Common Stock issued pursuant to a
transaction described in Sections 3, 4 and 5 of this Appendix I, or
(ii) Shares of Common Stock issuable or issued to
officers, employees, consultants, directors of the Company pursuant to a written
compensatory benefit plan.
(f) Upon each adjustment of the Exercise Price pursuant to this
Section 2, the number of Shares issuable upon exercise hereof shall be equal to
(x) the product of the number of shares of Common Stock the holder was entitled
to purchase immediately before such adjustment times the Exercise Price in
effect immediately before such adjustment divided by (y) the Exercise Price in
effect after giving effect to such adjustment.
3. RECLASSIFICATION OR MERGER. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or
2
<PAGE> 16
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any merger of the Company
with or into another corporation or entity (other then a merger with another
corporation in which the Company is a continuing corporation and which does not
result in any reclassification or change of outstanding securities issuable upon
exercise of this Warrant), or in case of any sale of all or substantially all of
the assets of the Company, the Company, or such successor or purchasing
corporation or entity, as the case may be, shall execute a new Warrant (in form
and substance satisfactory to the holder of this Warrant) providing that the
holder of this Warrant shall have the right to exercise such new Warrant and
upon such exercise to receive, in lieu of each share of Common Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of one share of Common Stock, such new Warrant
shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Appendix I. The provisions
of this Section 3 shall similarly apply to successive reclassifications,
changes, mergers and transfers.
4. SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Exercise Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted.
5. STOCK DIVIDENDS. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend payable in shares of Common
Stock, then the Exercise Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Exercise Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution, and the number of Shares subject to this Warrant shall
be proportionately adjusted.
6. OTHER DISTRIBUTIONS. In the event the Company shall declare a
dividend or distribution payable in cash, securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets or options or
rights not referred to in Sections 3, 4 or 5 of this Appendix I, then, in each
such case, provision shall be made by the Company such that the holder of this
Warrant shall receive upon exercise of this Warrant a proportionate share of any
such dividend or distribution as though it were the holder of the Shares as of
the record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.
7. NO IMPAIRMENT. The Company will not, by amendment of its Articles or
Bylaws or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Appendix I and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
8. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price shall be adjusted
pursuant to the provisions hereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate signed by its chief financial officer to
the holder hereof setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Exercise Price after giving effect to such adjustment.
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<PAGE> 17
APPENDIX II
REGISTRATION RIGHTS PROVISIONS
1. CERTAIN DEFINITIONS. Capitalized terms used in this Appendix II
that are not otherwise defined herein shall have the respective meanings
assigned to them in the Warrant, dated as of ______________, 199__, to which
this Appendix II is attached, if therein defined. For the purposes of this
Appendix II, the following terms shall have the following meanings:
(a) "Registrable Securities" shall mean the Shares issued or
issuable upon exercise of the Warrant (when and if issued in accordance
therewith).
(b) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(c) "Warrantholder" shall mean any registered holder of this
Warrant or any registered transferee thereof pursuant to Section 7 of the
Warrant.
2. INCIDENTAL REGISTRATION.
(a) Whenever the Company proposes to register any of its Common
Stock under the Securities Act for a public offering for cash, whether as a
primary or secondary offering or pursuant to registration rights granted to
holders of other securities of the Company (other than a registration relating
to employee benefit plans or to a transaction under Rule 145 of the Securities
Act), the Company shall, each such time, give the Warrantholder(s) advance
written notice thereof. Upon the written request of the Warrantholder(s) within
twenty (20) days after the Warrantholder's receipt of such notice, the Company
shall use its best efforts to cause to be included in such registration all of
the Registrable Securities which the Warrantholder(s) requests to be registered;
provided, however, that the Warrantholder agrees to sell such Registrable
Securities in the same manner and on the same terms and conditions as the other
holders of Common Stock which the Company proposes to register.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Warrantholder(s) as a part of the written notice
given pursuant to subsection 2(a) of this Appendix II. In such event the right
of the Warrantholder(s) to registration shall be conditioned upon the
participation by such holder in such underwriting and the inclusion of the
Registrable Securities of such holder in the underwriting to the extent provided
herein. All Warrantholders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company. Notwithstanding any other provision of this subsection, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities to be included in such registration. The Company shall so
advise all Warrantholders and the other holders distributing their securities
through such underwriting, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be allocated among all Warrantholders and other holders thereof in
proportion, as nearly as practicable, to the respective number of Registrable
Securities or other securities entitled to inclusion in such registration held
by the Warrantholder(s) and other selling shareholders participating in such
underwriting. If any Holder or other holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter.
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<PAGE> 18
3. OBLIGATIONS OF THE COMPANY. Whenever required under Section 2 of
this Appendix II to use its best efforts to effect the registration of any of
the Registrable Securities, the Company shall, as expeditiously as possible:
(a) Prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and remain
effective;
(b) Prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish to each Warrantholder participating in such
registration such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the Warrantholder may reasonably request in order to
facilitate the disposition of Registrable Securities owned by it; and
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
4. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Appendix II that
the Warrantholder shall furnish to the Company such information regarding it and
the Registrable Securities hold by it as the Company shall reasonably request
and as shall be required in connection with the action to be taken by the
Company.
5. EXPENSES OF REGISTRATION. All expenses incurred in connection with
a registration pursuant to Section 2 of this Appendix II (excluding underwriting
commissions and discounts), including without limitation all registration and
qualification fees, printing and accounting fees and reasonable fees and
disbursements of counsel for the Company and of counsel to the Warrantholder,
shall be borne by the Company.
6. UNDERWRITING REQUIREMENTS. In connection with any underwritten
public offering in which the Warrantholder has a right to participate under
Section 2 of this Appendix II, and subject to the agreement of the underwriters,
the Warrantholder may sell to the underwriters, in lieu of all or any part of
the shares of Registrable Securities to be included by the Warrantholder in the
offering, Warrants to purchase such shares of Registrable Securities.
7. DELAY OF REGISTRATION. So long as the Company has given any notice
required by Section 2 of this Appendix II, the Warrantholder shall not have any
right to take any action to restrain, enjoin or otherwise delay any registration
as the result of any controversy which might arise with respect to the
interpretation or implementation of this Appendix II; but nothing in this
Section 7 shall be construed as limiting the Warrantholder's right to damages
for breach hereof.
8. INDEMNIFICATION. In the event any of the Registrable Securities
are included in a registration statement under this Appendix II:
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<PAGE> 19
(a) The Company will indemnify and hold harmless the
Warrantholder, each officer, director, shareholder or partner of the
Warrantholder, any underwriter (as defined in the Securities Act) for the
Warrantholder, and each person, if any, who controls the Warrantholder, or such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which they may become
subject under the Securities Art, or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; and will reimburse the Warrantholder, each such officer,
director, shareholder or partner of the Warrantholder, and such underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 8 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld)
nor shall the Company be liable in any such case for any such loss, claim,
damage liability or action to the extent that it arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Warrantholder or any such underwriter or
controlling person.
(b) The Warrantholder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed such
registration statement, each person, if any, who controls the Company within the
meaning of the Securities Act and any underwriter for the Company (within the
meaning of the Securities Act) against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person or underwriter may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement, preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by the Warrantholder expressly for use in connection with such
registration; and the Warrantholder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the liability
of the Warrantholder under this Section 8 shall be limited to the amount of
proceeds received by the Warrantholder from the sale of the Registrable
Securities (or the Warrant with respect thereto). It is agreed that the
indemnity agreement contained in this Section 8 shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is affected without the consent of the Warrantholder (which consent
shall not be unreasonably withheld).
(c) Promptly after receipt by a party indemnified under this
Section 8 of notice of commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party under
this Section 8, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and
to the extent the indemnifying party desires, jointly with any other
indemnifying party similarly noticed, to
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<PAGE> 20
assume the defense thereof with counsel mutually satisfactory to the parties.
The failure to notify an indemnifying party promptly of the commencement of any
such action, if prejudicial to his ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 8, but the omission so to notify the indemnifying party will not relieve
him of any liability which he may have to any indemnified party other than under
this Section 8.
9. TRANSFER OF REGISTRATION RIGHTS. The registration rights of the
Warrantholder under this Appendix II may be transferred to any transferee of the
Warrantholder provided that the Company is given written notice by the
Warrantholder at the time of such transfer stating the name and address of the
transferee and identifying the Registrable Securities with respect to which the
rights under this Appendix II are being assigned.
10. REPORTING REQUIREMENTS. With a view toward making available the
benefits of certain rules and regulations of the Securities and Exchange
Commission that may at any time permit the sale of the Registrable Securities
with or without registration, the Company hereafter agrees to:
(a) Timely file and keep available such information, documents and
reports as may be required or prescribed by the Securities and Exchange
Commission under Section 13 or 15(d) (whichever is applicable) of the Exchange
Act as well as any other information, reports and documents required of the
Company under the Securities Act or Exchange Act;
(b) Use its best efforts to qualify for the use of Form S-3 to
register the Registrable Securities in a Secondary Offering; and
(c) Furnish to the Warrantholder or any of its transferees,
forthwith upon request, a written statement by the Company as to its compliance
with the reporting requirements of Rule 144, the "Eligibility Requirements for
Use of Form S-3", the Securities Act and the Exchange Act, as well as a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents of the Company as the Warrantholder or any of its transferees may
reasonably request in availing itself of any rule or regulation of the
Securities and Exchange Commission allowing the Warrantholder or any of its
transferees to sell such securities with or without registration.
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<PAGE> 21
APPENDIX III
CAPITALIZATION SCHEDULE
1
<PAGE> 22
VENTURI TECHNOLOGY ENTERPRISES, INC.
CAPITALIZATION TABLE
As of January 15, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Number of Shares
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCK, no par value, 20,000,000 shares authorized
Issued and Outstanding (1) 4,451,550
Reserved for Issuance under Dual Stock Option Plan 2,000,000
Reserved for Issuance pursuant to warrant rights 277,150
Reserved for Issuance pursuant to conversion rights (2) 1,089,410
- --------------------------------------------------------------------------------
PREFERRED STOCK, no par value,
5,000,000 shares authorized:
Series A 150,000 shares authorized 64,410
Series B 315,000 shares authorized (2) 205,000
- --------------------------------------------------------------------------------
WARRANTS to purchase Common Stock:
Sentry Financial Corporation
(expire 06/18/06) 83,333
Series A Preferred Stock Investors
(expire 2002) 64,410
Dominion Capital Corporation
(expire 2002) 5,000
Investors under June 1997 Private Placement
(expire 12/31/2000) 124,407
- --------------------------------------------------------------------------------
OPTIONS
Options granted under Dual Stock Option Plan 828,007
Options granted to Series B Placement Agent (2) 50,000
- --------------------------------------------------------------------------------
</TABLE>
(1) The Series B Preferred Stock is entitled to a 6% cumulative dividend
that is to be paid quarterly by the issuance of Common Stock to the
holders thereof. Because the number of shares to be issued in payment
of the dividend is to be determined according to the market price of
the Company's Common Stock at the time the dividend is paid, it is
impossible to determine how many shares of the Company's Common Stock
will be issued in payment of the Series B dividends.
(2) The Company is contractually obligated to issue and sell an additional
110,000 shares of Series B Preferred Stock (convertible into 550,000
shares of Common Stock), half on or before March 31, 1998 and half on
or before June 30, 1998. The Company is also required to issue options
to the Placement Agent in connection with the future placements of
Series B Preferred Stock to purchase an additional 100,000 shares of
Common Stock.
<PAGE> 1
Exhibit 10.16
[CAPITAL PARTNERS LETTERHEAD]
May 7, 1998
Gaylord Karren
Chairman and CEO
Venturi Technology Enterprises, Inc.
1327 N. State Street
Orem, Utah 84057
Dear Gaylord,
Capital Partners is pleased to inform you that it is agreeable to
extend a financial commitment to Venturi to provide an additional lease funding
source for the financing of Venturi trucks and related carpet cleaning
equipment.
Capital Partners hereby commits a total of $3,000,000 to be available
for Venturi's use. The initial funding will be for $500,000. As Venturi needs
additional lease line for its trucks, Capital Partners will make available
increments of $500,000 in funding.
Venturi will agree to issue to Capital Partners warrants equal to 15%
of the amount actually funded. Each funding amount of $500,000 will be subject
to changes in lease factor. Capital Partners will inform Venturi of the implicit
rate and residual agreement on each traunch.
Per our previous discussions, the leases will be on a capital lease
basis. Venturi will be required to pay an upfront amount equal to the first and
last lease payments. The $12,000 which Venturi paid in advance will be applied
towards the down payments of the initial traunch. All taxes and license and
filing fees will be included in the total and financed over the life of the
lease, which will be 40 months for the first traunch and extending to 48 months
on the second traunch.
If the foregoing is your understanding of the arrangements between
Venturi Technology Enterprises, Inc. and Capital Partners, L.L.C., please sign
and acknowledge this letter of commitment as provided below.
/s/ Gaylord Karren /s/ Michael Austin
- ------------------------------------ ---------------------------------------
Gaylord Karren, CEO CAPITAL PARTNERS Financial Group
Venturi Technology Enterprises, Inc. Michael Austin, President
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Exhibit 10.17
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is made and entered into
as of the _____ day of March, 1996, by and between Bill Thomas, doing business
under the names T-Co Carpet Cleaning and T-Co Heating Systems, having his
principal office at 3629 Conflans, Irving, Texas 75061 ("Seller"), and Venturi
Technologies, Inc., a Texas corporation, having its principal office at 415 West
1200 North, Orem, Utah 84057 ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller owns and operates a carpet cleaning business and a
businesses [sic] engaged in designing and manufacturing heaters used in carpet
cleaning equipment, which business [sic] are located in the Dallas, Texas area;
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser the Seller's Assets, as hereinafter defined, connected with
the businesses described above in exchange for Purchaser's common stock upon the
terms and conditions described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
1. Purchase and Sale of Business. Subject to and upon the terms and
conditions set forth in this Agreement, Seller will sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser will purchase, at the Closing
hereunder, all of the business assets, properties, goodwill and rights of Seller
as a going concern, of every nature, kind and description, tangible and
intangible, wheresoever located and whether or not carried or reflected on the
books and records of Seller (hereinafter sometimes collectively called "Seller's
Assets"), including, without limitation, (i) the right to use Seller's business
names and all variations thereof, including any fictitious or assumed names
under which Seller is doing business, (ii) the assets referred to in the form of
Bill of Sale and Assignment attached hereto as Exhibit "A", (iii) the assets
reflected on the Balance Sheet referred to in Section 5.4 hereof, with only such
dispositions of such assets reflected on the Balance Sheet as shall have
occurred in the ordinary course of Seller's business between the date thereof
and the Closing and which are permitted by the terms hereof, and (iv) all
patents, patent applications, patent licenses, trademarks, trademark
registrations, and applications therefor, service marks, service names, trade
names, copyrights and copyright registrations, and applications therefor, wholly
or partially owned or held by Seller or used in the operation of Seller's
business. Seller's Assets shall be conveyed free and clear of all liabilities,
obligations, liens and encumbrances excepting only those liabilities and
obligations which are expressly to be assumed by Purchaser hereunder and those
liens and encumbrances securing the same which are specifically disclosed herein
or expressly permitted by the terms hereof.
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2. Payment for Seller's Assets.
2.1 Stock for Seller's Assets. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Seller's Assets by Seller to
Purchaser, and in reliance upon the representations and warranties made herein
by Seller and Shareholders, Purchaser will, at the closing, in full payment for
Seller's Assets, issue to Seller, and deliver to Seller certificates
representing, one hundred thousand (100,000) shares of Purchaser's no par value
common stock (the "Shares"), which certificates representing the Shares shall be
in the form of the stock certificate attached hereto as Exhibit "B".
2.2 Restricted Stock. The Shares to be issued to Seller pursuant to
this Agreement have not been registered with the Securities and Exchange
Commission, nor have the Shares been registered or qualified under the
securities laws of any state. The Seller acknowledges that the Shares are
subject to the following restriction which will be noted as a legend in
substantially the following form on the face of the certificates representing
the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY
INTEREST THEREIN MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND
QUALIFICATION UNDER THE LAW OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED AS TO SAID SALE OR OFFER.
In order to establish exemptions from registration under both Federal and state
corporate securities laws, the Seller hereby makes the following representations
to the Purchaser. Seller represents that it is acquiring the Shares for its own
account, for investment, and not with a view to or for resale in connection with
any distribution thereof. The Seller further represents that it has such
knowledge and experience in business and financial matters that it is capable of
evaluating the merits and risks of obtaining stock in the Purchaser. The Seller
understands the speculative nature of the Purchaser's stock and represents that
Seller has adequate net worth and means to provide for its current needs and to
sustain a complete loss of its investment and that the Seller has no need of
liquidity of its investment. The Seller understands that at present no public
market exists, and that a public market may never exist, for the Shares and that
the Purchaser is under no obligation to provide a market for the Shares.
2.3 Restriction on Resale. Seller hereby covenants and agrees not to
sell or offer to sell all or any part of the Shares from the Closing Date until
the earlier of two years from the Closing Date or the first date on which the
Purchaser sells its stock to the public by means of an underwritten
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public offering. The certificates representing the Shares shall contain, for so
long as the restriction set forth in this Section remains in effect, a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT BETWEEN THE COMPANY
AND THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
THAT THE SHARES MAY NOT BE OFFERED OR SOLD FROM THE DATE OF ISSUANCE OF
THE SHARES UNTIL THE EARLIER TO OCCUR OF TWO YEARS FROM SUCH DATE OR
THE DATE UPON WHICH THE COMPANY FIRST OFFERS ITS SHARES TO THE PUBLIC
IN AN UNDERWRITTEN PUBLIC OFFERING.
2.4 Right of Rescission. Purchaser or Seller may rescind and cancel
this Agreement and the transactions provided for in this Agreement by personally
serving upon the other party written notice of rescission no sooner than sixty
(60) days after the Closing Date and no later than ninety (90) days after the
Closing Date. Upon such a rescission and cancellation, each party shall
cooperate in good faith to return the parties as close as reasonably possible to
their respective positions prior to the Closing. Specifically, Seller shall
deliver to Purchaser for cancellation the original stock certificate or
certificates representing the Shares, duly endorsed by Seller, and Seller shall
assume all of those liabilities assumed by Purchaser in the Liabilities
Undertaking attached hereto as Exhibit "C," and Purchaser shall return to Seller
the Seller's Assets or their net value. All rights, duties and obligations of
the parties under any NonCompetition or Non-Disclosure agreements shall survive
a rescission or cancellation of this Agreement.
2.5 Consent to Dilution. Seller acknowledges that Purchaser intends to
acquire additional businesses and assets by issuing shares of its common stock,
and that Purchaser may otherwise issue shares of its common stock in the future.
Seller acknowledges that such issuances of common stock by Purchaser will have
the effect of diluting Seller's proportionate ownership of Purchaser, and Seller
specifically consents to the issuance of common stock to other parties and to
the dilution it may cause in Seller's proportionate ownership in Purchaser to
the extent such stock issuances are deemed by the board of directors of
Purchaser to be in the best interests of Purchaser.
2.6 Liabilities Undertaking. In addition to the foregoing, Purchaser
will execute and deliver to Seller at the Closing a Liabilities Undertaking in
the form of Exhibit "C" attached hereto, pursuant to which Purchaser shall
assume and undertake to pay or otherwise discharge those liabilities or
obligations set forth therein.
3. Closing. The Closing shall take place at 10:00 a.m., local time, on
the 28th day of March, 1996, at the offices of Purchaser or such other time and
place as the parties may agree upon. The day on which the Closing actually takes
place is herein sometimes referred to as the Closing Date. In the event either
of the parties is entitled not to close on the scheduled date because a
condition to the Closing set forth in Section 13 or 14 hereof has not been met
(or waived by the party or parties entitled to waive it), such party may
postpone the Closing from time to time, by giving at
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least five days prior notice to the other party, until the condition has been
met (which all parties will use their best efforts to cause to happen), but in
no event to a date later than April 30, 1996.
4. Seller's Obligations at Closing; Further Assurances.
4.1 At the Closing, Seller will deliver to Purchaser:
4.1.1 a cashier's or certified check drawn by Seller to the
order of Purchaser in the aggregate amount of all of Seller's cash on
hand and in banks less an amount equal to all uncleared checks which
have been drawn by Seller prior to the Closing in payment of
liabilities of Seller which are assumed by Purchaser hereunder (and
Seller agrees to retain in such banks an amount equal to such uncleared
checks until such checks are cleared) or, at Purchaser's option, an
assignment of all of Seller's bank accounts in form and substance
satisfactory to Purchaser;
4.1.2 a Bill of Sale and Assignment duly executed by Seller in
the form of Exhibit "A" attached hereto;
4.1.3 such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance satisfactory
to Purchaser and Purchaser's counsel, as shall be effective to vest in
Purchaser good and marketable title to Seller's Assets;
4.1.4 all contracts, files and other data and documents
pertaining to Seller's Assets; and
4.1.5 all documents required to be delivered to Purchaser
under the provisions of this Agreement.
4.2 At any time and from time to time after the Closing, at
Purchaser's request and without further consideration, Seller will execute and
deliver such other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Purchaser may reasonably deem necessary or
desirable in order to more effectively transfer, convey and assign to Purchaser,
and to confirm Purchaser's title to, all of Seller's Assets, to put Purchaser in
actual possession and operating control thereof and to assist Purchaser in
exercising all rights with respect thereto. After the Closing, at reasonable
times and on reasonable notice, Seller shall have access to the books and
records pertaining to its operations.
4.3 Seller agrees that Purchaser shall have the right and
authority to collect for its own account all receivables and other items which
shall be transferred to Purchaser as provided herein and to endorse with the
name of Seller any checks received on account of any such receivables or other
items. Seller agrees that it will promptly transfer and deliver to Purchaser any
cash or other property which Seller may receive in respect of such receivables
or other items.
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4.4 Seller shall pay any and all income taxes payable as a result
of this transaction, and shall indemnify and hold harmless Purchaser from and
against any income tax liability that may result from this transaction.
4.5 Seller and Purchaser have agreed to the allocation of the
purchase price herein among the Seller's Assets as set forth in Schedule 4.5. In
accordance with the provisions of Section 1060 of the Internal Revenue Code of
1986, as amended, Seller and Purchaser shall file an asset allocation statement
on Internal Revenue Service Form 8594 for the tax year in which the Closing
occurs. Upon such filing, Seller and Purchaser shall provide each other with a
copy of such form as filed by each of them.
5. Representations and Warranties by Seller. Seller represents
and warrants to Purchaser as follows:
5.1 Organization, Standing and Qualification. Seller is an
individual transacting business as a sole proprietorship under the business
names "T-Co Carpet Cleaning" and "T-Co Heating Systems" and various versions
thereof. Seller is not a corporation or a partnership. Seller has all requisite
power and authority and is entitled to carry on its business as now being
conducted and to own, lease or operate its properties as and in the places where
such business is now conducted and to own, lease or operate its properties as
and in the places where such business in now conducted and such properties are
now owned, leased or operated; and Seller is duly authorized to do business in
the states in which the nature of the activities conducted by it or the
character of the properties owned, leased or operated by it require such
qualification, licensing or domestication.
5.2 Subsidiaries. Seller has no subsidiary or parent corporations
except those that may be listed on Schedule 5.2. Seller has no interest, direct
or indirect, and has no commitment to purchase any interest, direct or indirect,
in any other corporation or in any partnership, joint venture or other business
enterprise or entity other than as set forth on Schedule 5.2.
5.3 Execution, Delivery and Performance of Agreement; Authority.
Neither the execution, delivery nor performance of this Agreement by Seller
will, with or without the giving of notice or the passage of time, or both,
conflict with, result in a default, right to accelerate or loss of rights under,
or result in the creation of any lien, charge or encumbrance pursuant to, any
provision of any franchise, mortgage, deed of trust, lease, license, agreement,
understanding, law, rule or regulation or any order, judgment or decree to which
Seller is a party or by which Seller may be bound or affected. Seller has the
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
5.4 Financial Statements. Seller has delivered to Purchaser copies
of the following financial statements prepared by Seller, (herein collectively
called the "Financial Statements"), all of which are complete and correct, have
been prepared from the books and records of Seller in accordance with generally
accepted accounting principles, consistently applied and maintained
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throughout the periods indicated and fairly present the financial condition of
Seller as at their respective dates and the results of its operations for the
periods covered thereby:
5.4.1 an unaudited balance sheet of Seller (the "Balance
Sheet") as at __________, 19______, (the "Balance Sheet Date") and
Seller's unaudited statement of earnings and source and application of
funds for the _______ week period then ended.
5.4.2 unaudited balance sheets of Seller and unaudited
statements of earnings and source and application of funds for the
prior two years.
Such statements of earnings do not contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of business except
as expressly specified therein, and such interim financial statements include
all adjustments, which consist only of normal recurring accruals, necessary for
such fair presentation.
5.5 Absence of Undisclosed Liabilities. Except as and to the
extent reflected or reserved against on the face of the Balance Sheet (excluding
any notes thereto), as of the Balance Sheet Date Seller had no debts,
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature whatsoever, including, without limitation, any foreign or domestic
tax liabilities or deferred tax liabilities incurred in respect of or measured
by Seller's income, or its period prior to the close of business on the Balance
Sheet Date or any other debts, liabilities or obligations relating to or arising
out of any act, omission, transaction, circumstance, sale of goods or services,
state of facts or other condition which occurred or existed on or before the
Balance Sheet Date, whether or not then known, due or payable. None of the
Seller's employees is now, or will by the passage of time hereafter become,
entitled to receive any vacation time, vacation pay or severance pay
attributable to services rendered prior to the Balance Sheet Date except as
disclosed on the face of the Balance Sheet (excluding any notes thereto).
5.6 Taxes. All taxes, including, without limitation, income,
property, sales, use, franchise, value added, employees' income withholding and
social security taxes, imposed by the United States or by any foreign country or
by any state, municipality, subdivision or instrumentality of the United States
or of any foreign country, or by any other taxing authority, which are due or
payable by Seller, and all interest and penalties thereon, whether disputed or
not, have been paid in full, all tax returns required to be filed in connection
therewith have been accurately prepared and duly and timely filed and all
deposits required by law to be made by Seller with respect to employees'
withholding taxes have been duly made. Seller has not been delinquent in the
payment of any foreign or domestic tax, assessment or governmental charge or
deposit and has no tax difficulty or claim outstanding, proposed or assessed
against it, and there is no basis for any such deficiency or claim. Seller's
federal income tax returns have been filed with and accepted by the Internal
Revenue Service for all of its fiscal years through the year ended 1995, there
is not now in force any extension of time with respect to the date on which any
tax return was or is due to be filed by or with respect to Seller, or any waiver
or agreement by it for the extension of time for the assessment of any tax.
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5.7 Absence of Changes or Events. Except as may be set forth in
Schedule 5.7 attached hereto, since the Balance Sheet Date Seller has conducted
its business only in the ordinary course and has not:
5.7.1 incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection
with the purchase of goods or services in the ordinary course of
business and consistent with its prior practice, none of which
liabilities, in any case or in the aggregate, materially and adversely
affects the business, liabilities or financial condition of Seller;
5.7.2 discharged or satisfied any lien, charge or encumbrance
other than those then required to be discharged or satisfied, or paid
any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current liabilities
shown on the Balance Sheet and current liabilities incurred since the
Balance Sheet Date in the ordinary course of business and consistent
with its prior practice;
5.7.3 mortgaged, pledged or subjected to lien, charge,
security interest or any other encumbrance or restriction any of its
property, business or assets, tangible or intangible;
5.7.4 sold, transferred, leased to others or otherwise
disposed of any of its assets, except for inventory sold in the
ordinary course of business, or canceled or compromised any debt or
claim, or waived or released any right of substantial value;
5.7.5 received any notice of termination of any contract,
lease or other agreement or suffered any damage, destruction or loss
(whether or not covered by insurance) which, in any case or in the
aggregate, has had a materially adverse effect on the assets,
operations or prospects of Seller;
5.7.6 encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slow-downs or
lock-outs, or had any material change in its relations with its
employees, agents, customers or suppliers;
5.7.7 transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any United
States or foreign license, patent, copyright, trademark, trade name,
invention or similar rights, or modified any existing rights with
respect thereto;
5.7.8 made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance or vacation pay, to any
employee, salesman, distributor or agent of Seller;
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5.7.9 acquired any capital stock or other securities of any
corporation or any interest in any business enterprise, or otherwise
made any loan or advance to or investment in any person, firm or
corporation;
5.7.10 made any capital expenditures or capital additions or
betterments in excess of an aggregate of $1,000.00;
5.7.11 changed its banking or safe deposit arrangements;
5.7.12 instituted, settled or agreed to settle any litigation,
action or proceeding before any court or governmental body relating to
Seller or Seller's Assets;
5.7.13 failed to replenish its inventories and supplies in a
normal and customary manner consistent with its prior practice and
prudent business practices prevailing in the industry, or made any
purchase commitment in excess of the normal, ordinary and usual
requirements of its business or at any price in excess of the then
current market price or upon terms and conditions more onerous than
those usual and customary in the industry, or made any change in its
selling, pricing, advertising or personnel practices inconsistent with
its prior practice and prudent business practices prevailing in the
industry;
5.7.14 suffered any change, event or condition which, in any
case or in the aggregate, has had or may have a materially adverse
effect on Seller's condition (financial or otherwise), properties,
assets, liabilities, operations or prospects, including, without
limitation, any change in Seller's revenues, costs, backlog or
relations with its employees, agents, customers or suppliers; or
5.7.15 entered into any transaction, contract or commitment
other than in the ordinary course of business or paid or agreed to pay
any legal, accounting, brokerage, finder's fee, taxes or other expenses
in connection with, or incurred any severance pay obligations by reason
of, this Agreement or the transactions contemplated hereby.
5.8 Litigation. Except as may be set forth in Schedule 5.8
attached hereto, there is no claim, legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or to the knowledge
of Seller threatened, against or relating to Seller, its employees, its
properties, assets or business or the transactions contemplated by this
Agreement, and Seller does not know or have reason to be aware of any basis for
the same.
5.9 Compliance With Laws and Other Instruments. Except as may be
set forth in Schedule 5.9 annexed hereto, Seller has complied with all existing
laws, rules, regulations, ordinances, orders, judgments and decrees now or
hereafter applicable to its business, properties or operations as presently
conducted. Neither the ownership nor use of Seller's Assets nor the conduct of
its business conflicts with the rights of any other person, firm or corporation
or violates, or with
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or without the giving of notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate or loss of rights
under any lien, encumbrance, mortgage, deed of trust, lease, license, agreement,
understanding, law, ordinance, rule or regulation, or any order, judgment or
decree to which Seller is a party or by which it may be bound or affected.
Seller is not aware of any proposed laws, rules, regulations, ordinances,
orders, judgments, decrees, governmental takings, condemnations or other
proceedings which would be applicable to its business, operations or properties
and which might adversely affect its properties, assets, liabilities, operations
or prospects, either before or after the Closing.
5.10 Title to Properties. Seller has good, marketable and insurable
title to all the properties and assets it owns or uses in its business or
purports to own, including, without limitation, those reflected in its books and
records and in the Balance Sheet (except inventory sold after the Balance Sheet
Date in the ordinary course of business). None of such properties and assets are
subject to any mortgage, pledge, lien, charge, security interest, encumbrance,
restriction, lease, license, easement, liability or adverse claim of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise, except, (i) as expressly set forth in the Balance Sheet as securing
specific liabilities or as otherwise expressly permitted by the terms hereof or
(ii) those imperfections of title and encumbrances, if any, which (a) are not
substantial in character, amount or extent and do not materially detract from
the value of the properties subject thereto, (b) do not interfere with either
the present and continued use of such property or the conduct of Seller's normal
operations, and (c) have arisen only in the ordinary course of business. All of
the properties and assets owned, leased or used by Seller are in good operating
condition and repair, are suitable for the purposes used, and are adequate and
sufficient for all current operations of Seller.
5.11 Environmental Compliance. Except as may be set forth in Schedule
5.11 attached hereto, Seller's business is being operated in material compliance
with all environmental laws, including all orders, writs, injunctions, decrees,
judgments, rulings, laws, rules and regulations of any court, governmental
authority or arbitrator, and all terms and conditions of the required approvals,
authorizations, permits, licenses, orders and agreements, and are also in
material compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any environmental law.
5.12 Environmental Notices. Except as may be set forth in Schedule 5.12
attached hereto, Seller is not aware of, nor has it been advised of, any past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans that may interfere with or prevent compliance or
continued compliance with environmental laws or which may give rise to any
common law or legal liability, or which would otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation, and
that is based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any hazardous
substance.
5.13 Environmental Claims. Except as may be set forth in Schedule 5.13
attached hereto, there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand
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letter, notice of violation, investigation, allegations, or proceeding pending
or threatened against Seller, of which Seller has received notice, in connection
with Seller's business or the Seller's Assets relating in any way to
environmental laws.
5.14 Environmental Permits. Except as may be set forth in Schedule
5.14, to the best of Seller's knowledge, Seller currently maintains all material
governmental approvals, authorizations, permits, licenses, orders and agreements
required to operate and maintain Seller's business and the Seller's Assets, and
has materially complied with all requirements relating thereto.
5.15 Schedules. Attached hereto as Schedule 5.15 is a separate
schedule containing an accurate and complete list and description of:
5.15.1 All real property owned by Seller or in which Seller
has a leasehold or other interest or which is used by Seller in
connection with the operation of its business, together with a
description of each lease, sublease, license, or any other instrument
under which Seller claims or holds such leasehold or other interest or
right to the use thereof or pursuant to which Seller has assigned,
sublet or granted any rights therein, identifying the parties thereto,
the rental or other payment terms, expiration date and cancellation and
renewal terms thereof.
5.15.2 As of a date no earlier than February 29, 1996, all of
Seller's receivables (which shall include accounts receivable, loans
receivable and any advances), together with detailed information as to
each such listed receivable which has been outstanding for more than 30
days.
5.15.3 All machinery, tools, equipment, motor vehicles,
rolling stock and other tangible personal property (other than
inventory and supplies, owned, leased or used by Seller except for
items having a value of less than $100.00, which do not, in the
aggregate, have a total value of more than $250.00, setting forth with
respect to all such listed property a summary description of all
leases, liens, claims, encumbrances, charges, restrictions, covenants
and conditions relating thereto, identifying the parties thereto, the
rental or other payment terms, expiration date and cancellation and
renewal terms thereof.
5.15.4 All patents, patent applications, patent licenses,
trademarks, trademark registrations, and applications therefor, service
marks, service names, trade names, copyrights and copyright
registrations, and applications therefor, wholly or partially owned or
held by Seller or used in the operation of Seller's business.
5.15.5 All fire, theft, casualty, liability and other
insurance policies insuring Seller, specifying with respect to each
such policy the name of the insurer, the risk insured against, the
limits of coverage, the deductible amount (if any), the premium rate
and the date through which coverage will continue by virtue of premiums
already paid. Except as disclosed in Schedule 5.15, such policies are
with reputable insurers, provide adequate coverage for all normal risks
incident to Seller's assets, properties and business operations and are
in
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character and amount at least equivalent to that carried by persons
engaged in a business subject to the same or similar perils or hazards.
5.15.6 All sales agent or route distributorship agreements or
franchises or agreements providing for the services of an independent
contractor to which Seller is a party or by which it is bound.
5.15.7 All contracts, agreements, commitments or licenses,
whether written or oral, relating to patents, trademarks, trade names,
copyrights, inventions, processes, know-how, formulae or trade secrets
to which Seller is a party or by which it is bound.
5.15.8 All loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, leases or lease purchase agreements
to which Seller is a party or by which it is bound.
5.15.9 All contracts, agreements, commitments or other
understandings or arrangements to which Seller is a party or by which
it or any of its property is bound or affected by excluding (i)
purchase and sales orders and commitments made in the ordinary course
of business involving payments or receipts by Seller of less than
$100.00 in any single case but not more than $250.00 in the aggregate,
(ii) contracts entered into in the ordinary course of business and
involving payments or receipts by Seller of less than $100.00 in the
case of any single contract but not more than $250.00 in the aggregate,
and (iii) contracts entered into in the ordinary course of business
which are terminable by Seller on less than 30 days' notice without any
penalty or consideration and involving payments or receipts by Seller
of less than $100.00 in the case of any single contract but not more
than $250.00 in the aggregate.
5.15.10 All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or retirement
plans, employee stock options or stock purchase plans and group life,
health and accident insurance and other employee benefit plans,
agreements, arrangements or commitments, whether or not legal binding,
including, without limitation, holiday, vacation, Christmas and other
bonus practices, to which Seller is a party or is bound or which relate
to the operation of Seller's business.
5.15.11 The names and current annual salary rates of all
persons (including independent commission agents) whose annual
compensation (direct or indirect) from Seller is currently at the rate
of more than $10,000.00 per annum and showing separately for each such
person the amounts paid or payable as salary, bonus payments and any
indirect compensation for the year ended December 31, 1995; and
5.15.12 The name of each bank in which Seller has an account
or safe deposit box and the names of all persons authorized to draw
thereon or have access thereto; and the
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names of all persons, if any, holding tax or other powers of attorney
from Seller and a summary of the terms thereof.
All of the contracts, agreements, leases, licenses and commitments required to
be listed on Schedule 5.15 (other than those which have been fully performed)
are valid and binding, enforceable in accordance with their respective terms, in
full force and effect, and except as otherwise specified in Schedule 5.15,
validly assignable to Purchaser without the consent of any other party so that,
after the assignment thereof to Purchaser pursuant hereto, Purchaser will be
entitled to the full benefits thereof. Except as disclosed in Schedule 5.15,
none of the payments required to be made under any such contract, agreement,
lease, license or commitment has been prepaid more than 30 days prior to the due
date of such payment thereunder, and there is not thereunder any existing
default, or event which, after notice or lapse of time, or both, would
constitute a default or result in a right to accelerate or loss of rights, and
none of such contracts, agreements, leases, licenses or commitments is, either
when considered singly or in the aggregate with others, unduly burdensome,
onerous or materially adverse to Seller's business, properties, assets, earnings
or prospects or likely, either before or after the Closing, to result in any
material loss or liability. None of Seller's existing or completed contracts is
subject to renegotiation with any governmental body. True and complete copies of
all such contracts, agreements, leases, licenses and other documents listed on
Schedule 5.15 (together with any and all amendments thereto) will be delivered
to Purchaser at Purchaser's request.
5.16 Patents, Etc. Seller owns or possesses the licenses or other
rights to use all copyrights, trademarks, service marks, service names, trade
names, patents, trade secrets and other proprietary rights necessary to conduct
its business as it is presently operated. Seller is not infringing upon or
otherwise acting adversely to any copyrights, trademarks, trademark rights,
service marks, service names, trade names, patents, patent rights, licenses,
trade secrets or other proprietary rights owned by any other person or persons,
and there is no claim or action by any such person pending, or to the knowledge
of Seller threatened, with respect thereto.
5.17 No Guaranties. None of the obligations or liabilities of Seller is
guaranteed by any other person, firm or corporation, nor has Seller guaranteed
the obligations or liabilities of any other person, firm or corporation.
5.18 Inventory. Substantially all items of Seller's inventory and
related supplies (including raw materials, work-in-process and finished goods)
reflected on the Balance Sheet or thereafter acquired (and not subsequently
disposed of in the ordinary course of business) are merchantable, or suitable
and usable for the production or completion of merchantable products, for sale
in the ordinary course of business as standard quality goods at normal mark-ups,
substantially all of which items are not obsolete or below standard quality and
as a whole such inventory reflected in the Balance Sheet and the books and
records of Seller is so reflected on the basis of a complete physical count and
is valued at the lower of cost (on a last-in, first-out basis) or market in
accordance with generally accepted accounting principles consistently applied.
Seller's Assets include a sufficient but not an excessive quantity of each type
of such inventory and supplies in order to meet
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the normal requirements of Seller's business and operations for a period of not
less than one nor more than three months.
5.19 Receivables. All receivables of Seller (including accounts
receivable, loans receivable and advances) which are reflected in the Balance
Sheet, and all such receivables which will have arisen since the date thereof,
shall have arisen only from bona fide transactions in the ordinary course of
Seller's business and shall be (or have been) fully collected when due, or in
the case of each account receivable within 90 days after it arose, without
resort to litigation and without offset or counterclaim, in the aggregate face
amounts thereof except to the extent of the normal allowance for doubtful
accounts with respect to accounts receivable computed as a percentage of sales
consistent with Seller's prior practices as reflected on the most recent annual
Financial Statement.
5.20 Records. The books of account of Seller are substantially complete
and correct in all material respects, and there have been no transactions
involving the business of Seller which are required to be set forth therein and
which have not been accurately so set forth.
5.21 Absence of Certain Business Practices. Neither Seller nor any
employee or agent of Seller, nor any other person acting on its behalf, has,
directly or indirectly, within the past five years given or agreed to give any
gift or similar benefit to any customer, supplier, governmental employee or
other person who is or may be in a position to help or hinder the business of
seller (or assist Seller in connection with any actual or proposed transaction)
which (i) might subject Seller to any damage or penalty in any civil, criminal
or governmental litigation or proceeding, (ii) if not given in the past, might
have had an adverse effect on the assets, business or operations of Seller as
reflected in the Financial Statements, or (iii) if not continue in the future,
might adversely affect Seller's assets, business, operation or prospects or
which might subject Seller to suit or penalty in any private or governmental
litigation or proceeding.
5.22 Disclosure. No representation or warranty by Seller contained in
this Agreement nor any statement or certificate furnished or to be furnished by
Seller to Purchaser or its representatives in connection herewith or pursuant
hereto contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to make the statements
herein or therein contained not misleading or necessary in order to provide a
prospective purchaser of the business of the Seller with adequate information as
to Seller and its condition (financial and otherwise), properties, assets,
liabilities, business and prospects, and Seller has disclosed to Purchaser in
writing all material adverse facts known to them relating to the same. The
representations and warranties contained in this Section 5 or elsewhere in this
Agreement or any document delivered pursuant hereto shall not be affected or
deemed waived by reason of the fact that Purchaser and/or its representatives
knew or should have known that any such representation or warranty is or might
be inaccurate in any respect.
5.23 No Conflict. The execution and delivery of this Agreement and the
sale of assets hereunder and performance of this Agreement by Seller will not
conflict with any regulation or
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<PAGE> 14
agreement to which Seller is a party or by which it may be bound. No
authorization by, consent of, or filing with any regulatory body or other
person, not duly obtained or made, is necessary to permit Seller to execute and
perform this Agreement.
6. Representations and Warranties by Purchaser. Purchaser represents
and warrants to Seller as follows:
6.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has full
corporate power and authority to enter into this Agreement and the related
agreements referred to herein and to carry out the transactions contemplated by
this Agreement and to carry on its business as now being conducted and to own,
lease or operate its properties.
6.2 Authorization and Approval of Agreement. All proceedings or
corporate action required to be taken by Purchaser relating to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall have been taken at or prior to the Closing.
6.3 Execution, Delivery and Performance of Agreement. Neither the
execution, delivery nor performance of this Agreement by Purchaser will, with or
without the giving of notice or the passage of time, or both, conflict with,
result in a default, right to accelerate or loss of rights under, or result in
the creation of any lien, charge or encumbrance pursuant to, any provision of
Purchaser's certificate of incorporation or bylaws or any franchise, mortgage,
deed of trust, lease, license, agreement, understanding, law, ordinance, rule or
regulation or any order, judgment or decree to which Purchaser is a party or by
which it may be bound or affected. Purchaser has full power and authority to
enter into this Agreement and to carry out the transactions contemplated hereby,
all proceedings required to be taken by Purchaser to authorize the execution,
delivery and performance of this Agreement and the agreements relating hereto
have been properly taken and this Agreement constitutes a valid and binding
obligation of Purchaser.
6.4 Litigation. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative proceeding, nor any
order, decree or judgment in progress, pending or in effect, or to the knowledge
of Purchaser threatened, against or relating to Purchaser in connection with or
relating to the transactions contemplated by this Agreement and Purchaser does
not know or have any reason to be aware of any basis for the same.
7. Conduct of Business Prior to Closing.
7.1 Prior to the Closing, Seller shall conduct its business and affairs
only in the ordinary course and consistent with its prior practice and shall
maintain, keep and preserve its assets and properties in good condition and
repair and maintain insurance thereon in accordance with present practices, and
Seller will use its best efforts (i) to preserve the business and organization
of Seller intact, (ii) to keep available to Purchaser the services of Seller's
present employees, agents and
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<PAGE> 15
independent contractors, (iii) to preserve for the benefit of Purchaser the
goodwill of Seller's suppliers, customers, landlords and others having business
relations with it, and (iv) to cooperate with Purchaser and use reasonable
efforts to assist Purchaser in obtaining the consent of any landlord or other
party to any lease or contract with Seller where the consent of such landlord or
other party may be required by reason of the transactions contemplated hereby.
Without limiting the generality of the foregoing, prior to the Closing Seller
will not without Purchaser's prior written approval enter into any contract,
agreement, commitment or other understanding or arrangement except for those of
the type which would not have to be listed and described under section 5.15.9
above.
7.2 Seller shall give Purchaser prompt written notice of any change in
any of the information contained in the representations and warranties made in
Section 5 or elsewhere in this Agreement or the Schedules referred to herein
which occurs prior to the Closing.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) the cancellation of contracts, agreements,
commitments or other understandings or arrangements to which Seller is a party,
including, without limitation, purchase orders for any item of inventory and
commitments for capital expenditures or improvements, (ii) the commencement in
one or more of Seller's locations of the orderly and gradual discontinuance of
particular items or operations and (iii) purchasing, pricing or selling policy
(including, without limitation, selling merchandise at discounts); provided,
however, that nothing contained in this Section 7.3 shall require Seller to take
or fail to take any action that is likely to give rise to a substantial penalty
or a claim for damages by any third party against Seller, or is likely to result
in losses to Seller, or is otherwise likely to prejudice in any material respect
or unduly interfere with the conduct of Seller's business and operations in the
ordinary course consistent with prior practice, or is likely to result in a
breach by Seller of any of its representations, warranties or covenants
contained in this Agreement (unless any such breach is first waived in writing
by Purchaser).
8. Access to Information and Documents. Upon reasonable notice and
during regular business hours, Seller will give Purchaser and Purchaser's
attorney, accountants and other representatives full access to Seller's
personnel and all properties, documents, contracts, books and records of Seller
and will furnish Purchaser with copies of such documents, and with such
information with respect to the affairs of Seller as Purchaser may from time to
time request, and Purchaser will not improperly disclose the same prior to the
Closing. Any such furnishing of such information to Purchaser or any
investigation by Purchaser shall not affect Purchaser's right to rely on any
representations and warranties made in this Agreement or in connection herewith
or pursuant hereto.
9. Employment Matters.
9.1 It is the intent and desire of Purchaser to maintain personnel
after the Closing Date as close as possible to current levels, and to provide
employment to as many of Seller's current employees as possible. Attached hereto
as Schedule 9.1 is a list of all employees of Seller as of the date of this
Agreement, including the salary or rate of compensation for each such employee.
Prior
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<PAGE> 16
to the Closing Date, Purchaser will provide to Seller a list of employees to
whom Purchaser does not intend to offer continued employment after the Closing
Date. At the Closing Date all employees listed on Schedule 9.1 who have not been
excluded by Purchaser shall become the employees of Purchaser, and shall
thereupon become subject to Purchaser's employment policies and procedures.
9.2 As of the Closing Date, Bill Thomas shall become part of the
executive management team of Purchaser, and his title, duties, compensation and
benefits shall thereafter be set by the Board of Directors of Purchaser in
accordance with Purchaser's executive compensation guidelines, as such
guidelines may be amended and reformulated from time to time. It is intended
that the base salary of Bill Thomas shall be commensurate with the base salary
of the most senior management personnel of Purchaser. Bill Thomas shall be
entitled to participate fully in all employee benefits and arrangements now in
effect or that may hereafter be established. The level of benefits applicable to
Bill Thomas shall be determined the same as the level of benefits are determined
for other senior management personnel of Purchaser.
9.3 Purchaser covenants and agrees that at, or within a reasonable
period of time following, the Closing Date Purchaser shall provide such
training, equipment and support to Seller's employees as is necessary to enable
such employees to utilize and sell Purchaser's technology and methods.
10. Release of Name. At the request of Purchaser, Seller shall execute
and deliver to Purchaser whatever documents or consents are necessary to release
the name "T-Co" and to allow Purchaser to use that name or any variations
thereof.
11. Bulk Sales Compliance. Purchaser hereby waives compliance by Seller
with the provisions of the Bulk Sales Law of any state, and Seller warrants and
agrees to pay and discharge when due all claims of creditors which could be
asserted against Purchaser by reason of such noncompliance to the extent that
such liabilities are not specifically assumed by Purchaser under this Agreement.
Seller hereby indemnifies and agrees to hold Purchaser harmless from, against
and in respect of (and shall on demand reimburse Purchaser for) any loss,
liability, cost or expense, including, without limitation, attorneys' fees,
suffered or incurred by Purchaser by reason of the failure of Seller to pay or
discharge such claims.
12. Non-Competition Agreement. Seller shall execute and deliver to
Purchaser at or prior to the Closing a Non-Competition and Continuity of
Business Dealings Undertaking in the form of Exhibit "D" annexed hereto.
13. Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser hereunder are subject, at the option of Purchaser, to the fulfillment
of each of the following conditions at or prior to the Closing, and Seller shall
exert its best efforts to cause each such condition to be fulfilled:
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<PAGE> 17
13.1 All representations and warranties of Seller contained herein
or in any document delivered pursuant hereto shall be true and correct in all
material respects when made and shall be deemed to have been made again at and
as of the date of the Closing, and shall then be true and correct in all
material respects except for changes in the ordinary course of business after
the date hereof in conformity with the covenants and agreements contained
herein.
13.2 All covenants, agreements and obligations required by the
terms of this Agreement to be performed by Seller at or before the Closing shall
have been duly and properly performed in all material respects.
13.3 Since the date of this Agreement there shall not have occurred
any material adverse change in the condition (financial or otherwise), business,
properties, assets or prospects of Seller.
13.4 All documents required to be delivered to Purchaser at or
prior to the Closing shall have been so delivered.
13.5 Seller shall have obtained written consents to the transfer or
assignment to Purchaser of all consignment agreements, licenses, leases and
other material contracts of Seller (other than immaterial purchase and sales
orders in the ordinary course of business) where the consent of any other party
to any such contract may, in the opinion of Purchaser's counsel be required for
such assignment or transfer.
14. Conditions Precedent to Seller's Obligations. All obligations
of Seller at the Closing are subject, at the option of Seller, to the
fulfillment of each of the following conditions at or prior to the Closing, and
Purchaser shall exert its best efforts to cause each such condition to be so
fulfilled:
14.1 All representations and warranties of Purchaser contained
herein or in any document delivered pursuant hereto shall be true and correct in
all material respects when made and as of the Closing.
14.2 All obligations required by the terms of this Agreement to be
performed by Purchaser at or before the Closing shall have been duly and
properly performed in all material respects.
15. Indemnification.
15.1 Seller hereby indemnifies and agrees to hold Purchaser
harmless from, against and in respect of (and shall on demand reimburse
Purchaser for):
15.1.1 any and all loss, liability or damage suffered or
incurred by Purchaser by reason of any untrue representation, breach of
warranty or nonfulfillment of any covenant by Seller contained herein
or in any certificate, document or instrument delivered to Purchaser
pursuant hereto or in connection herewith;
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<PAGE> 18
15.1.2 any and all loss, liability or damage suffered or
incurred by Purchaser in respect of or in connection with any
liabilities of Seller not expressly assumed by Purchaser pursuant to
the terms of the Liabilities Undertaking;
15.1.3 any and all debts, liabilities or obligations of
Seller, direct or indirect, fixed, contingent or otherwise, which exist
at or as of the Balance Sheet Date or which arise after the Balance
Sheet Date but which are based upon or arise from any act, omission,
transaction, circumstance, sale of goods or services, state of facts or
other condition which occurred or existed on or before the Balance
Sheet Date, whether or not then known, due or payable, except to the
extent reflected or reserved against on the face of the Balance Sheet
(excluding any notes thereto);
15.1.4 any and all debts, liabilities or obligations of
Seller, direct or indirect, fixed, contingent or otherwise, which exist
at or as of the date of the Closing hereunder or which arise after the
Closing but which are based upon or arise from any act, omission,
transaction, circumstance, sale of goods or services, state of facts or
other condition which occurred or existed on or before the date of the
Closing, whether or not then known, due or payable, except to the
extent (i) reflected or reserved against on the face of the Balance
Sheet (excluding any notes thereto) or incurred after the Balance Sheet
Date in connection with the purchase of goods or services in the
ordinary course of Seller's business and in conformity with the
representations, warranties and covenants contained in this Agreement
(or a Schedule hereto) and (ii) expressly assumed by Purchaser pursuant
to the terms of the Liabilities Undertaking;
15.1.5 the amount of any and all receivables of the Company
which are not collected in accordance with the provisions of this
Agreement;
15.1.6 any and all loss, liability or damage suffered or
incurred by Purchaser by reason of or in connection with any claim for
finder's fee or brokerage or other commission arising by reason of any
services alleged to have been rendered to or at the instance of Seller
with respect to this Agreement or any of the transactions contemplated
hereby;
15.1.7 any and all loss, liability or damage suffered or
incurred by Purchaser by reason of any claim for severance pay accruing
or incurred at any time on or after the date hereof except to the
extent any one or more specific employees are discharged prior to the
Closing hereunder with the prior written consent of Purchaser and such
consent contains the name(s) of such specific employee(s); and
15.1.8 any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
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15.2 Purchaser hereby agrees to indemnify and hold Seller harmless
from, against and in respect of (and shall on demand reimburse for):
15.2.1 Any and all loss, liability or damage resulting from
any untrue representation, breach of warranty or nonfulfillment of any
covenant or agreement by Purchaser contained herein or in any
certificate, document or instrument delivered to Seller hereunder;
15.2.2 Any and all liabilities or obligations of Seller
specifically assumed by Purchaser pursuant to this Agreement; and
15.2.3 Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to anything set forth in
Sections 15.2.1 and 15.2.2 above or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
16. Nature and Survival of Representations and Warranties. All
statements, representations, warranties, indemnities, covenants and agreements
made by each of the parties hereto shall survive the Closing.
17. Notices. Any and all notices or other communications required
or permitted to be given under any of the provisions of this Agreement shall be
in writing and shall be deemed to have been duly given when personally delivered
or mailed by first class registered mail, return receipt requested, addressed to
the parties at the addresses set forth above (or at such other address as any
party may specify by notice to all other parties given as aforesaid).
18. Legal and Other Costs.
18.1 In the event that any party (the "Defaulting Party") defaults
in his or its obligations under this Agreement and, as a result thereof, the
other party (the "Non-Defaulting Party") seeks to legally enforce his or its
rights hereunder against the Defaulting Party, then, in addition to all damages
and other remedies to which the Non-Defaulting Party is entitled by reason of
such default, the Defaulting Party shall promptly pay to the Non-Defaulting
Party an amount equal to all costs and expenses (including reasonable attorneys'
fees) paid or incurred by the Non-Defaulting Party in connection with such
enforcement.
18.2 In the event that the Non-Defaulting Party is entitled to
receive an amount of money by reason of the Defaulting Party's default
hereunder, then, in addition to such amount of money, the defaulting Party shall
promptly pay to the Non-Defaulting Party a sum equal to interest on such amount
of money accruing at the rate of 2% per month (but if such rate is not permitted
under the laws of the state having jurisdiction of such matter, then at the
highest rate which is permitted to be paid under the laws of such state) during
the period between the date such payment should have been made hereunder the
date of the actual payment thereof [sic].
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<PAGE> 20
19. Miscellaneous.
19.1 This writing constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified, amended or
terminated except by a written agreement specifically referring to this
Agreement signed by all of the parties hereto.
19.2 No waiver of any breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach of default of the same
of similar nature.
19.3 This Agreement shall be binding upon and inure to the benefit of
each corporate party hereto, its successors and assigns, and each individual
party hereto and his heirs, personal representatives, successors and assigns.
19.4 The paragraph headings contain [sic] herein are for the purposes
of convenience only and are not intended to defined [sic] or limit the contents
of said paragraphs.
19.5 Each party hereto shall cooperate, shall take such further action
and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement.
19.6 Seller will pay all sales, transfer and documentary taxes, if any,
payable in connection with the sale, conveyances, assignments, transfers and
deliveries to be made to Purchaser hereunder.
19.7 This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
19.8 This Agreement and all amendments thereof shall be governed by and
construed in accordance with law of the State of Utah (Purchaser's principal
place of business) applicable to contracts made and to be performed therein.
19.9 Any and all information revealed pursuant to this Agreement or
previously in the course of negotiations among the parties, shall be held in
strict confidence and solely for the purpose of facilitating the consummation of
this Agreement in allowing the parties to exercise prudent care with respect
thereto. Should this Agreement not be consummated for any reason, no further use
may be made by any party of any such information so obtained (except to the
extent such information either is or becomes published or is a matter of public
knowledge or was already known prior to the inception of negotiations for this
Agreement) and the parties may be held strictly accountable for any unauthorized
use thereof. Should this Agreement not be consummated for any reason, the
parties shall return all documents (including all copies thereof) received from
any party in connection with this Agreement and/or the transactions contemplated
hereby. If the transactions contemplated by this Agreement are consummated,
neither party will disclose to others any information concerning the business of
Seller or Purchaser or the terms of this Agreement except as approved by the
other
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party, as necessary for the conduct of the Purchaser's or Seller's business, as
required by law or by a court of law or other regulatory or administrative
tribunal, which is ascertainable or obtained from public or published
information, which was received from a third party not known by such person to
be under an obligation to keep such information confidential, or which is or
becomes known to the public (other than through a breach of this Agreement).
19.10 Wherever possible, each provision hereof shall be interpreted in
such manner as to be effective and valid under applicable law, but in case any
one or more of the provisions contained herein shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly, executed as of the day and year first above written.
SELLER:
/s/ Bill Thomas
-----------------------------------
BILL THOMAS doing business as T-CO
CARPET CLEANING and T-CO HEATING
SYSTEMS
PURCHASER:
VENTURI TECHNOLOGIES, INC., a Texas
Corporation
By: /s/ Gaylord Karren
-------------------------------
Its: Chairman & CEO
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<PAGE> 1
EXHIBIT 10.18
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is entered into as of the
31 day of March, 1998, by and between Michael Shurtliff, doing business under
the name Protech Carpet Cleaning and Flood Restoration, having a principal
office at 1002 West River Walk Drive, P.O. Box 1058, Riverton, Utah 84065
("Seller"), and Venturi Technology Enterprises, Inc., a Nevada corporation,
having its principal office at 1327 North State Street, Orem, Utah 84057
("Purchaser").
WHEREAS, Seller owns and operates a carpet cleaning business located in
the Riverton, Utah area;
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser the Seller's Assets connected with the Seller's business in
exchange for Purchaser's common stock upon the terms described in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties agree as follows:
1. Purchase and Sale of Business. Seller shall sell to Purchaser, and Purchaser
shall purchase from Seller all of Seller's interest in all the business assets,
goodwill and rights owned by Seller and used in the operation of Seller's
business ("Seller's Assets"), including (i) the right to use Seller's business
name, (ii) the assets listed in the Bill of Sale and Assignment attached as
Exhibit "A", (iii) the assets listed on the Balance Sheet described in Section
5.3, except for assets disposed of in the ordinary course of Seller's business
between the Balance Sheet Date and the Closing Date, and (iv) all patents,
licenses, trademarks, service marks, service names, trade names, copyrights, and
applications therefor. Seller shall transfer Seller's Assets free and clear of
all liabilities and liens except as provided by this Agreement.
2. Payment for Seller's Assets.
2.1 Stock for Seller's Assets. As full payment for Seller's Assets,
Purchaser shall, at the Closing, cause to be issued to Seller Four Thousand
(4,000) shares of Purchaser's $.001 par value common stock (the "Shares").
2.2 Restricted Stock. The Shares issued to Seller under this Agreement
have not been registered with the Securities and Exchange Commission, nor have
the Shares been qualified under the securities laws of any state. The Seller
acknowledges that the Shares are subject to the following restriction which will
be printed in the following form on the certificates representing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND
<PAGE> 2
NEITHER SAID SHARES NOR ANY INTEREST THEREIN MAY BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE ACT AND QUALIFICATION UNDER THE LAW OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE OR OFFER.
Seller represents the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Seller is acquiring
the Shares for its own account, for investment, and not for resale in connection
with any distribution thereof. Seller has such knowledge and experience in
business and financial matters that it is capable of evaluating the risks of
obtaining the Shares. Seller understands the speculative nature of the Shares.
Seller has adequate net worth and means to provide for its current needs and to
sustain a complete loss of its investment. Seller has no need of liquidity of
its investment. Seller understands that at present no public market exists, and
that a public market may never exist, for the Shares and that the Purchaser is
under no obligation to provide a market for the Shares.
2.3 Restriction on Resale. Seller shall not sell any of the Shares
until the earlier of one year from the Closing Date or the first date on which
the Purchaser sells its stock to the public in an underwritten public offering.
The certificates representing the Shares shall contain, for so long as this
restriction remains in effect, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT BETWEEN THE COMPANY
AND THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
THAT THE SHARES MAY NOT BE OFFERED OR SOLD FROM THE DATE OF ISSUANCE OF
THE SHARES UNTIL THE EARLIER TO OCCUR OF TWO YEARS FROM SUCH DATE OR
THE DATE UPON WHICH THE COMPANY FIRST OFFERS ITS SHARES TO THE PUBLIC
IN AN UNDERWRITTEN PUBLIC OFFERING.
2.4 Right of Rescission. Either party may rescind this Agreement by
personally delivering a written notice of rescission to the other party. The
rescission cannot occur earlier than sixty days after the Closing Date, and it
cannot occur later than ninety days after the Closing Date. If there is a
rescission, each party shall return as close as reasonably possible the other
party to its position prior to the Closing. Specifically, Seller shall return
the stock certificates and shall assume the liabilities assumed by Purchaser on
behalf of Seller, and Purchaser shall return Seller's Assets (or their net
value). The terms of any Non-Competition or Non-Disclosure agreements shall
continue in effect regardless of a rescission.
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<PAGE> 3
2.5 Consent to Dilution. Seller understands that Purchaser plans to
acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Seller understands
and consents that future issuance of stock will dilute Seller's proportionate
ownership of Purchaser.
2.6 Liabilities Undertaking. At the Closing Purchaser shall sign a
Liabilities Undertaking in the form of the attached Exhibit "B," pursuant to
which Purchaser shall assume to pay or discharge the obligations set forth
therein.
3. Closing. The Closing shall take place at 10:00 a.m. on the 31 day of
March, 1998, at Purchaser's office or at such other time and place as the
parties agree, but in no event to a date later than 1st June, 1998.
4. Seller's Obligations at Closing; Further Assurances.
4.1 At the Closing, Seller shall deliver to Purchaser:
4.1.1 a cashier's or certified check payable to Purchaser in
the amount of Seller's cash on hand and in banks, less the amount
necessary for all uncleared checks to clear which are in payment of
liabilities assumed by Purchaser hereunder (and Seller agrees to keep
enough money in the bank for such checks to clear) or, at Purchaser's
option, an assignment of all of Seller's bank accounts;
4.1.2 a Bill of Sale and Assignment signed by Seller in the
form attached as Exhibit "A";
4.1.3 any other instruments of assignment and transfer
necessary to vest in Purchaser good and marketable title to Seller's
Assets;
4.1.4 all contracts and records relating to Seller's Assets;
and
4.1.5 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and Seller
must sign and/or deliver any documents necessary to transfer and assign to
Purchaser, and confirm Purchaser's title to Seller's Assets, and to assist
Purchaser in the exercise of all rights thereto. After the Closing, Seller shall
have access to the books and records pertaining to its operations.
4.3 Purchaser shall have the right to collect all receivables
transferred to Purchaser under this Agreement and to endorse Seller's name on
checks received for such receivables. Seller shall transfer to Purchaser any
cash or other property Seller receives for such receivables.
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<PAGE> 4
4.4 Seller shall pay any income taxes payable as a result of this
transaction, and shall indemnify Purchaser from any income tax liability that
may result from this transaction.
4.5 The parties agree to allocate the purchase price among the Seller's
Assets as set forth in Schedule 4.5.
5. Representations and Warranties by Seller. Seller represents and
warrants to Purchaser as follows:
5.1 Organization, Standing and Qualification. Seller is an individual
doing business as a sole proprietorship under the business name "Protech Carpet
Cleaning and Flood Restoration". Seller is not a corporation, limited liability
company or a partnership. Seller is authorized to carry on its business as now
conducted and to own and operate its properties in the places where such
properties are now located; and Seller is authorized and licensed to do business
in the states where such is required.
5.2 Execution and Performance of Agreement; Authority. The performance
of this Agreement by Seller will not result in a default or breach of any other
agreement to which Seller is a party. Seller has the authority to enter into
this Agreement.
5.3 Financial Statements. The copies of the following financial
statements given to Purchaser and prepared by Seller (called the "Financial
Statements") are complete and correct, have been prepared from the records of
Seller in accordance with generally accepted accounting principles and fairly
present the financial condition of Seller as of their dates and the results of
its operations for the periods covered thereby:
5.3.1 an unaudited balance sheet of Seller (the "Balance
Sheet") as of Dec. 31, 1997, (the "Balance Sheet Date") and Seller's
unaudited income or cash flow statement for the 5 week period ended
1997.
Such statements of earnings do not contain any items of special income or any
other income not earned in the ordinary course of business except as specified
therein, and such interim financial statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
5.4 Absence of Undisclosed Liabilities. Except as reflected on the
Balance Sheet, as of the Balance Sheet Date Seller had no debts or obligations
of any nature whatsoever, including any tax liabilities incurred in respect of
Seller's income, or its period prior to the close of business on the Balance
Sheet Date or any other debts or obligations relating to any act, omission or
other condition which occurred or existed on or before the Balance Sheet Date.
5.5 Taxes. All taxes and assessments imposed by any taxing authority,
whether federal, state, local, foreign or otherwise which are due or payable by
Seller, and all interest and penalties thereon, have been paid in full. All tax
returns required to be filed have been
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<PAGE> 5
accurately prepared and filed and all deposits required to be made by Seller
with respect to employees' withholding taxes have been made.
5.6 Absence of Changes or Events. Except as may be set forth in
Schedule 5.6, since the Balance Sheet Date, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.
5.7 Litigation. Except as set forth in Schedule 5.7 there is no claim,
order, investigation or other proceeding, against Seller, its employees, its
properties, or business or the transactions contemplated by this Agreement, and
Seller knows of no basis for the same.
5.8 Compliance With Laws and Other Instruments. Except as set forth in
Schedule 5.8, Seller has complied with all laws applicable to its business. The
ownership and use of Seller's Assets as well as the conduct of its business will
not conflict with the rights of any other person or entity, and will not cause a
default under any agreement to which Seller is a party. Seller is not aware of
any proposed laws, condemnations or other proceedings which would affect its
business or Seller's Assets.
5.9 Title to Properties. Seller has good title to Seller's Assets. None
of Seller's Assets are subject to any lien, lease, license, or adverse claim
except (i) as expressly set forth in the Balance Sheet as securing specific
liabilities or as otherwise expressly permitted by the terms of this Agreement,
or (ii) insubstantial imperfections of title which have arisen in the ordinary
course of business. Seller's Assets are in good operating condition and repair,
are suitable for the purposes used, and are adequate for all current operations
of Seller.
5.10 Environmental Compliance. Except as set forth in Schedule 5.10,
Seller's business is being operated in compliance with all environmental laws
and with all terms of required permits and licenses.
5.11 Environmental Notices. Except as set forth in Schedule 5.11,
Seller is not aware of any circumstances that may interfere with its compliance
with environmental laws or which may give rise to any liability, or which would
otherwise form the basis of any claim or investigation, and that is based on
Seller's manufacture, storage, disposal, transport, or handling, or the release
into the environment, of any hazardous substance.
5.12 Environmental Claims. Except as set forth in Schedule 5.12, there
is no claim, investigation, or proceeding pending or threatened against Seller,
in connection with the Seller's Assets or its business relating to environmental
laws.
5.13 Environmental Permits. Except as set forth in Schedule 5.13,
Seller currently maintains all material government permits, licenses and
agreements required to operate Seller's Assets and business, and has complied
with all requirements relating thereto.
5.14 Schedules. Schedule 5.14 contains a complete list and description
of:
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<PAGE> 6
5.14.1 All real property in which Seller has any ownership or
other interest and which is used in connection with the operation of
its business.
5.14.2 As of a date no earlier than May 11th 1998, all of
Seller's receivables with detailed information on each receivable which
has been outstanding more than 30 days.
5.14.3 All equipment, motor vehicles, and other personal
property (other than inventory and supplies), owned or leased by Seller
setting forth a summary description of all leases, claims, and
conditions relating thereto.
5.14.4 All patents, trademarks, service marks, service names,
trade names, and copyrights together with any registrations,
applications and licenses related thereto, owned by Seller or used in
the operation of Seller's business.
5.14.5 All insurance policies insuring Seller or its assets,
specifying the name of the insurer, the risk insured against, the
limits of coverage, the deductible amount, the premium rate and the
date through which coverage will continue by virtue of premiums already
paid.
5.14.6 All contracts or agreements relating to the Assets to
which Seller is a party.
5.14.7 All loan agreements, conditional sale agreements,
security agreements, guaranties, and leases to which Seller is a party.
5.14.8 All employment and consulting agreements, compensation
plans, pension plans or retirement plans, group life, health and
accident insurance and other employee benefit plans, including holiday,
vacation, Christmas and other bonus practices, to which Seller is a
party.
5.14.9 The name of all banks where Seller has accounts or safe
deposit boxes and the names of all persons authorized to sign on the
accounts or have access to the boxes; and the names of all persons
holding tax or other powers of attorney from Seller and a summary of
the terms thereof.
All of the agreements, leases and licenses required to be listed on Schedule
5.14 (other than those which have been fully performed) are valid and binding,
and except as otherwise specified in Schedule 5.14, assignable to Purchaser
without the consent of any other party so that, after assignment to Purchaser,
Purchaser will be entitled to the full benefits thereof. Except as disclosed in
Schedule 5.14, no payment required to be made under any such
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<PAGE> 7
agreement, lease or license has been prepaid more than 30 days prior its due
date, and there is not any default, or event which would constitute a default,
and none of such agreements, leases or licenses is unduly burdensome or adverse
to Seller's Assets or business or likely to result in any material loss or
liability. None of Seller's existing or completed contracts is subject to
renegotiation with any government body.
5.15 No Guaranties. No obligation of Seller is guaranteed by any other
person or entity, nor has Seller guaranteed any obligation of any other person
or entity.
5.16 Receivables. All Seller's receivables have arisen only from
transactions in the ordinary course of business and shall be fully collected
within 90 days after each receivable arose, without offset or resort to
litigation, except for an allowance for doubtful accounts computed as a
percentage of sales consistent with prior practices as reflected on the most
recent annual Financial Statement.
5.17 Records. The accounting books of Seller are complete and correct,
and no transactions which are required to be recorded therein have been omitted.
5.18 Absence of Certain Business Practices. Neither Seller nor any
employee or agent of Seller has within the past five years agreed to give any
gift to any customer, supplier, government employee or other person who may be
in a position to help or hinder the business of Seller which (i) might subject
Seller to liability in any proceeding, (ii) if not given in the past, might have
had an adverse effect on the Seller's Assets or business as reflected in the
Financial Statements, or (iii) if not continued in the future, might adversely
affect Seller's Assets or business, or which might subject Seller to liability
in any proceeding.
5.19 Disclosure. All of Seller's representations made in this Agreement
and its related documents are true and contain no untrue statements and do not
omit important facts. Seller has disclosed to Purchaser in writing all the
adverse facts concerning the Seller's Assets and its business. The effectiveness
of the representations are not altered or waived by the fact that Purchaser
might have known that any of the representations are inaccurate.
5.20 No Conflict. Performance of this Agreement by Seller will not
conflict with any regulations or agreements to which Seller is a party. No
authorization or filing, which has not already been completed, is necessary for
Seller to perform this Agreement.
6. Representations and Warranties by Purchaser. Purchaser represents
and warrants to Seller as follows:
6.1 Organization. Purchaser is a corporation organized and in good
standing under the laws of the State of Nevada and has full authority to enter
into this Agreement and to carry on its business and to own and operate its
properties.
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<PAGE> 8
6.2 Authorization and Approval of Agreement. All actions required to be
taken by Purchaser relating to the singing of this Agreement shall have been
taken at or prior to the Closing.
6.3 Execution and Performance of Agreement. The performance of this
Agreement by Purchaser will not result in a default of any Agreement to which
Purchaser is a party. Purchaser has the authority to enter into this Agreement.
6.4 Litigation. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. Conduct of Business Prior to Closing.
7.1 Prior to the Closing, Seller shall conduct its business only in a
manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of Seller intact, (ii) to keep available the services
of Seller's present employees, agents and independent contractors, (iii) to
preserve the goodwill of Seller's suppliers, customers, landlords and others
having business relations with it, and (iv) to cooperate with Purchaser and
assist in obtaining the consent of any party to any lease or contract with
Seller where the consent of such party may be required by reason of this
Agreement.
7.2 If there is a change in any information contained in this Agreement
or its related documents prior to closing, Seller shall give Purchaser prompt
written notice.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) canceling agreements to which Seller is a party,
including purchase orders and commitments for capital expenditures or
improvements, (ii) discontinuing particular items or operations and (iii)
purchasing, pricing or selling policy (including selling merchandise at
discounts); provided, however, that nothing contained in this Section shall
require Seller to take action that is likely to result in a penalty or claim for
damages against Seller, or in losses to Seller, or to interfere with the conduct
of Seller's business consistent with prior practice, or to result in a breach by
Seller of any of its representations contained in this Agreement (unless the
breach is waived by Purchaser).
8. Access to Information and Documents. Upon Purchaser's request,
Seller shall give Purchaser access to Seller's personnel and all its properties,
documents and records and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same prior to the
Closing. The information gathered by Purchaser under this Section shall not
affect Purchaser's right to rely on the representations made in this Agreement.
9. Employment Matters.
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<PAGE> 9
9.1 Purchaser intends to provide employment to as many of Seller's
current employees as possible. Schedule 9.1 is a list of all Seller's employees
as of the date of this Agreement, including the compensation for each employee.
Prior to the Closing Date, Purchaser shall provide Seller a list of employees
whom Purchaser does not intend to employ after the Closing Date. All remaining
employees shall become the employees of Purchaser on the Closing Date.
9.2 Within a reasonable period following the Closing Date Purchaser
shall provide training and support to Seller's employees to enable them to use
and sell Purchaser's products and services.
10. Bulk Sales Compliance. Purchaser waives Seller's compliance with
the Bulk Sales Law of any state. Seller agrees to pay all claims of creditors
which could be asserted against Purchaser because of such noncompliance unless
such claims are assumed by Purchaser under this Agreement. Seller indemnifies
Purchaser against any liability or expense, including attorneys' fees, incurred
by Purchaser by reason of the failure of Seller to pay such claims.
11. Non-Competition Agreement. Seller shall sign at or prior to the
Closing a Non- Competition and Continuity of Business Dealings Undertaking in
the form of Exhibit "C."
12. Conditions to Purchaser's Obligations. All obligations of Purchaser
under this Agreement are subject to, at Purchaser's option, each of the
following conditions at or prior to the Closing, and Seller shall use its best
efforts to cause each condition to be fulfilled:
13.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
13.2 All duties required by this Agreement to be performed by Seller at
or before the Closing shall be performed.
13.3 Since the date of this Agreement there shall be no material
adverse change in the condition of Seller's Assets or its business.
13.4 All documents required to be delivered to Purchaser at or prior to
the Closing shall be delivered.
13.5 Seller shall obtain written consents to the transfer or assignment
to Purchaser of all agreements of Seller where the consent of any other party
may be required.
14. Conditions Precedent to Seller's Obligations. All obligations of
Seller at the Closing are subject to, at Seller's option, each of the following
conditions at or prior to the Closing, and Purchaser shall use its best efforts
to cause each condition to be fulfilled:
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<PAGE> 10
14.1 All representations of Purchaser contained in this Agreement or
the related documents shall be correct when made and as of the Closing.
14.2 All duties required by this Agreement to be performed by Purchaser
at or before the Closing shall be performed.
13. Indemnification.
15.1 Seller indemnifies and agrees to hold Purchaser harmless from:
15.1.1 any loss suffered by Purchaser because a representation
was not true, a warranty was breached or a duty was not performed by
Seller contained in this Agreement or a related document;
15.1.2 any loss suffered by Purchaser in connection with any
of Seller's liabilities which are not assumed by Purchaser under the
Liabilities Undertaking;
15.1.3 any liabilities or debts of Seller, which exist as of
the Balance Sheet Date or which arise after that date but which are
based upon any transaction, state of facts or other condition which
occurred on or before the Balance Sheet Date, except to the extent
reflected on the Balance Sheet;
15.1.4 any liabilities or debts of Seller, which exist as of
the Closing Date or which arise after that date but which are based
upon any transaction, state of facts or other condition which occurred
on or before the Closing Date, except to the extent (i) reflected on
the Balance Sheet or incurred after the Balance Sheet Date in
connection with a purchase in the ordinary course of Seller's business
and in conformity with the representations contained in this Agreement,
and (ii) assumed by Purchaser under the terms of the Liabilities
Undertaking; and
15.1.5 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
15.2 Purchaser hereby agrees to indemnify and hold Seller
harmless from:
15.2.1 any loss suffered by Seller because a representation
was not true, a warranty was breached or a duty was not performed by
Purchaser contained in this Agreement or a related document;
15.2.2 any liabilities or debts of Seller assumed by Purchaser
under this Agreement; and
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<PAGE> 11
15.2.3 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
16. Nature and Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall remain
effective after the Closing.
17. Notices. Any notices described under this Agreement shall be in
writing and shall be deemed given when personally delivered or mailed by first
class registered mail, return receipt requested, addressed to the parties at the
addresses set forth above.
18. Arbitration.
18.1 Any action, dispute, controversy or claim between or
among the Parties, whether sounding in contract, tort, or otherwise ("Dispute")
shall, at the request of any Party, be resolved by arbitration as set forth
below, and shall include any Dispute arising out of or relating to this
Agreement or any agreements or instruments relating to this Agreement or
delivered in connection with this Agreement. Any such Dispute shall be
determined by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The arbitration proceedings shall be
conducted in Salt Lake City, Utah. The arbitrator(s) shall have the
qualifications set forth in Section 18.2. All statutes of limitation which would
otherwise be applicable in a judicial action brought by a Party shall apply to
any arbitration proceeding under this Agreement.
11.2 The arbitrator(s) shall be selected in accordance with
the rules of the American Arbitration Association from panels maintained by the
Association. A single arbitrator shall be knowledgeable in the subject matter of
the arbitration proceeding. If more than one arbitrator is selected, at least
one of the arbitrators must be knowledgeable in the subject matter of the
Dispute and at least one of whom must be a practicing attorney. If more than one
arbitrator is selected, the controversy shall be decided by a majority vote of
the arbitrators. The arbitrator(s) shall award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrators' fees, and court
costs). The arbitrator(s) also may grant provisional or ancillary remedies such
as, for example, injunctive relief, attachment, or the appointment of a
receiver, either during the pendency of the arbitration proceeding or as part of
the arbitration award.
18.3 Notwithstanding the applicability of other law to any
agreements or instruments between or among the Parties, the Federal Arbitration
Act, 9 U.S.C. Sec. 1 et seq. Shall apply to the construction and interpretation
of this Agreement.
18.4 The Parties acknowledge that they have read and
understand the following disclosures:
ARBITRATION CAN BE FINAL AND BINDING ON THE PARTIES.
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THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT,
INCLUDING THEIR RIGHT TO A JURY TRIAL.
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND
DIFFERENT FROM COURT PROCEEDINGS.
ARBITRATORS' AWARDS ARE NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR
TO SEEK MODIFICATION OF RULINGS BY ARBITRATORS IS STRICTLY
LIMITED.
19. Legal and Other Costs. In the event that any party defaults in its
obligations under this Agreement and, as a result thereof, another party seeks
to legally enforce its rights hereunder against the defaulting party, then, in
addition to all damages and other remedies to which the non-defaulting party is
entitled by reason of such default, the defaulting party shall be liable for and
shall promptly pay to the non-defaulting party an amount equal to all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the
non-defaulting party in connection with such enforcement.
20. Miscellaneous.
20.1 This writing contains the entire agreement of the parties
concerning the subject matter hereof and it may not be amended or terminated
except by a written agreement signed by all the parties.
20.2 No waiver of any default is valid unless in writing and signed by
the waiving party, and no such waiver shall be deemed a waiver of any subsequent
default.
20.3 This Agreement shall be binding upon and inure to the benefit of
each corporate party, its successors and assigns, and each individual party
hereto and his/her heirs, personal representatives, successors and assigns.
20.4 The paragraph headings are for the purposes of convenience only
and are not intended to define or limit the contents of the paragraphs.
20.5 Each party shall cooperate and take such further action as may be
reasonably requested by any other party to carry out the provisions and purposes
of this Agreement.
20.6 This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
20.7 This Agreement and any amendments shall be governed by and
construed in accordance with law of the State of Utah.
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20.9 Any information revealed pursuant to this Agreement or previously
in the course of negotiations shall be held in confidence and solely for the
purpose of consummating this Agreement in allowing the parties to exercise
prudent care. If this Agreement is not consummated, no further use shall be made
of such information (except to the extent such information was already known
prior to this Agreement) and the parties may be held accountable for any
unauthorized use. If this Agreement is not consummated, the parties shall return
all documents received from any party in connection with this Agreement. If this
Agreement is consummated, neither party shall disclose any information
concerning the other party's business or the terms of this Agreement except (i)
as approved by the other party, (ii) as necessary for the conduct of the
Purchaser's or Seller's business, (iii) as required by law, or (iv) as is
ascertainable from public information.
20.10 Each provision of this Agreement shall be interpreted in such a
way as to be valid under all laws, but in case any of the provisions shall be
held to be illegal or unenforceable, such illegality or unenforceability shall
not affect any other provision and this Agreement shall be interpreted as if the
invalid provision was not included unless the absence of such provision would
make completing the transactions contemplated hereby unreasonable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first above written.
SELLER:
MICHAEL SHURTLIFF, doing business as
Protech Carpet Cleaning and Flood Restoration
/s/ Michael Shurtliff
---------------------
PURCHASER:
VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation
By:/s/ John Hopkins
----------------
Its:
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<PAGE> 14
EXHIBIT "A"
Bill of Sale and Assignment
<PAGE> 15
EXHIBIT "B"
Liabilities Undertaking
<PAGE> 16
EXHIBIT "C"
Non-Competition and Continuity of Business Dealings Undertaking
<PAGE> 17
Schedule 4.5
Allocation of Purchase Price
<PAGE> 18
Schedule 5.6
Material Changes or Events
<PAGE> 19
Schedule 5.7
Litigation
<PAGE> 20
Schedule 5.8
Compliance With Laws and Other Instruments
<PAGE> 21
Schedule 5.10
Environmental Compliance
<PAGE> 22
Schedule 5.11
Environmental Notices
<PAGE> 23
Schedule 5.12
Environmental Claims
<PAGE> 24
Schedule 5.13
Environmental Permits
<PAGE> 25
Schedule 5.14
Schedules of Assets, Contracts, etc.
<PAGE> 26
Schedule 9.1
Seller's Employees
<PAGE> 1
EXHIBIT 10.19
BILL OF SALE AND ASSIGNMENT
Michael Shurtliff, doing business as a sole proprietorship under the
name Protech Carpet Cleaning and Flood Restoration, (hereinafter called
"Assignor"), for One Dollar ($1.00) and other valuable consideration to it in
hand paid, receipt of which is hereby acknowledged, by these presents does sell,
assign, transfer and convey unto Venturi Technology Enterprises, Inc., a Nevada
corporation (hereinafter called "Assignee"), its successors and assigns, the
following described property, leases, licenses and intangible property:
All tangible and intangible property, leases and licenses of
every kind and description and wherever situated owned by Assignor or
to which Assignor has any right, title or interest on the date hereof,
excepting only those properties of Assignor listed on Schedule "A"
annexed hereto, and including, without limitation, all of Seller's
Assets as defined in a certain Agreement of Purchase and Sale of
Assets, dated April __, 1998, between Assignor as Seller and Assignee
as Purchaser (the "Agreement"), which includes, without limitation, the
following:
(i) All cash on hand and in bank accounts, notes and loans
receivable from customers, employees and others, marketable securities
and investments, merchandise and all other inventories, packaging and
shipping materials and other supplies and supply inventories, prepaid
insurance, prepaid interest and other prepaid items and deposits, cash
surrender values of all life insurance policies, contracts, choses in
action and causes of action, claims and rights of recovery or setoff of
every kind or character arising out of transactions or events occurring
on or prior to the date hereof irrespective of the date on which any
such cause of action, claim or right may arise or accrue;
(ii) All fixed assets including, without limitation,
leaseholds and leasehold improvements, fixtures, machinery, tools,
equipment, cars and trucks;
(iii) All inventions, patents, transferable licenses,
transferable permits and transferable franchises, trademarks, trade
names, service marks, service names, copyrights, know-how, stationery
and other imprinted material and office supplies, the right to receive
mail and other communications and shipment of merchandise addressed to
Assignor, its goodwill as a going concern, and the Assignor's entire
right to use the name "Protech Carpet Cleaning and Flood Restoration"
or any similar name;
(iv) All Books and records of Assignor;
(v) All contracts, agreements and understandings to which
Assignor is a party or by which Assignor may have any rights or
obligations; and
<PAGE> 2
(vi) All rights to use vendors, suppliers, dealers, brokers
and others, and all rights to deal with and sell to customers, to use
premises used by Assignor, and to rename, sell, buy, lease or assemble
all assets of Assignor.
Assignor hereby authorizes and grants its power of attorney to Assignee
and appoints Assignee and the officers thereof as Assignor's attorney-in-fact to
take any appropriate action in connection with any of said rights, claims,
causes of action and property, in the name of Assignor or in its own or any
other name but at its own expense, it being understood that this authorization
and power of attorney are coupled with an interest and irrevocable.
Assignee hereby assumes and agrees to keep, perform and fulfill all of
Assignor's obligations arising after the date hereof with respect to any of the
leases, licenses and intangible property transferred and assigned hereunder.
TO HAVE AND TO HOLD said rights, claims, causes of action, property,
assets, business and goodwill, as a going concern, unto the said Assignee, its
successors and assigns, to and for its use forever.
AND, Assignor does hereby warrant, covenant and agree that it:
(a) has good and marketable title to the properties and assets
hereby sold, assigned, transferred, conveyed and delivered, subject to
such liens and other encumbrances as are disclosed in the Agreement or
any schedules or exhibits thereto; and
(b) will warrant and defend the sale of, and title to, said
properties and assets against all and every person or persons
whomsoever claiming or to claim against any or all of the same.
IN WITNESS WHEREOF, Assignor has caused this instrument to be duly
executed this day of April, 1998.
ASSIGNOR:
---------------------------------------------------
Michael Shurtliff, doing business as Protech Carpet
Cleaning and Flood Restoration
ASSIGNEE:
VENTURI TECHNOLOGY ENTERPRISES, INC., a
Nevada corporation
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<PAGE> 3
By:
-----------------------------------------------
Its:
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<PAGE> 4
SCHEDULE "A"
(To Bill of Sale)
Excluded Property and Assets
<PAGE> 1
EXHIBIT 10.20
LIABILITIES UNDERTAKING
THIS LIABILITIES UNDERTAKING dated April ___, 1998, by VENTURI
TECHNOLOGY ENTERPRISES, INC., a Nevada corporation (hereinafter called the
"Purchaser"), and Michael Shurtliff, doing business as a sole proprietorship
under the name Protech Carpet Cleaning and Flood Restoration with its principal
office at 1002 West River Walk Drive, P.O. Box 1058, Riverton, Utah 84065
("Seller").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement of Purchase and Sale of Assets dated
April ___, 1998, among Purchaser and Seller (the "Agreement"), Seller has
concurrently herewith sold, assigned, transferred, conveyed and delivered to
Purchaser substantially all of the business, assets, properties, goodwill and
rights of Seller as a going concern (the "Seller's Assets"); and
WHEREAS, in partial consideration therefor, the Agreement requires
Purchaser to execute and deliver to Seller this Undertaking;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which by Purchaser is hereby
acknowledged, Purchaser hereby agrees as follows:
1. Purchaser hereby undertakes, assumes and agrees, subject to the limitations
contained herein, to perform, pay or discharge the following:
(a) only those unpaid debts and liabilities of Seller existing
at the Closing that are specifically set forth on Schedule "A" attached
hereto;
(b) only those unperformed and unfulfilled obligations which
are required to be performed and fulfilled by Seller under the terms of
executory written contracts, agreements, leases, licenses, commitments
and undertakings that are listed in Schedule "B" attached hereto.
2. Notwithstanding anything to the contrary contained above, the debts,
liabilities and obligations assumed by Purchaser under Paragraph 1 hereof shall
not include any:
(a) legal, accounting, brokerage, finder's fee, taxes or other
expenses incurred by Seller in connection with the Agreement or the
consummation of the transactions contemplated; or
(b) federal, state or local income, franchise, excise, sales,
use, property, payroll or similar taxes imposed on Seller except to the
extent that (i) such taxes constitute debts or liabilities of Seller
which would be assumed by Purchaser under the Provisions of paragraph
1(a) above, (ii) Purchaser gets the benefits of all deposits, escrow
accounts or other payments made or collected by such Seller on account
of or
<PAGE> 2
with respect to such tax liabilities; and (iii) the Seller complies
with each of the following conditions:
(A) The Seller shall afford Purchaser the right, at
its option, to assume the entire control of the preparation
and filing of all tax returns with respect thereto, and the
Seller shall keep Purchaser fully advised as to any and all
investigations, audits or other proceedings or communications
by any taxing agent or authority which may affect the amount
of the tax liabilities being assumed hereunder; and
(B) The Seller shall afford Purchaser the right, at
its option, to assume the entire control of any such audit or
other proceeding insofar as it may relate to the liabilities
of the Seller assumed hereunder, including the defense,
compromise or settlement thereof, and in connection therewith
the Seller shall cooperate fully and make available to
Purchaser all information under its control relating thereto
which Purchaser may reasonably request and shall execute and
deliver to Purchaser such powers-of-attorney or other
documents which Purchaser may reasonably deem necessary or
desirable to effectuate the foregoing.
(c) liabilities or obligations of Seller resulting or arising
from claims for personal injury or property damage or out of any breach
of any nonperformance by Seller of any contract, commitment or
obligation imposed by law or otherwise, except to the extent covered by
insurance proceeds payable to or on behalf of Purchaser; or
(d) debts, liabilities or obligations arising under any
contract which has not been assigned to Purchaser so that Purchaser
will enjoy the full benefits thereunder or which is listed in any
Schedule to the Agreement and specifically designated thereon as "Not
Assumed"; or
(e) debts, liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
date of the Closing or which arise after the Closing but which are
based upon or arise from any act, omission, transaction, circumstance,
sale of goods or services, state of facts or other condition which
occurred or existed on or before the date of the Closing, whether or
not then known, due or payable, except to the extent specifically set
forth on Schedule "A" or Schedule "B" attached hereto in connection
with the purchase of goods or services in the ordinary course of
Seller's business and in conformity with the representations,
warranties and covenants contained in the Agreement; or
(f) accounts payable incurred by Seller that are more than
sixty (60) days past due as of the date of the Closing.
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<PAGE> 3
3. Nothing contained herein shall require Purchaser to pay or discharge
any debts or obligations expressly assumed hereby so long as Purchaser shall in
good faith contest or cause to be contested the amount or validity thereof.
4. Other than as specifically stated above or in the Agreement,
Purchaser assumes no debt, liability or obligation of Seller by this
Undertaking, and it is expressly understood and agreed that all debts,
liabilities and obligations not assumed hereunder by Purchaser shall remain the
sole obligation of Seller, successors and assigns, and no person, firm or
corporation other than Seller shall have any rights under this Undertaking or
the provisions herein.
VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation
By:_______________________________________________
Its:
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<PAGE> 4
SCHEDULE "A"
Debts and Liabilities Assumed by Purchaser
<PAGE> 5
SCHEDULE "B"
Unperformed and Unfulfilled Obligations Assumed by Purchaser
<PAGE> 1
EXHIBIT 10.21
NON-COMPETITION, CONFIDENTIALITY AND
CONTINUITY OF BUSINESS DEALINGS
UNDERTAKING
This NON-COMPETITION AND CONTINUITY OF BUSINESS DEALINGS UNDERTAKING
dated April ___, 1998 by Michael Surtliff, doing business under the name Protech
Carpet Cleaning and Flood Restoration ("Seller"), in favor of VENTURI TECHNOLOGY
ENTERPRISES, INC., a Nevada corporation (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Agreement of Purchase and Sale
of Assets, dated April ___, 1998 (the "Agreement"), with Seller pursuant to
which the Company is to purchase and the Seller is to sell, all of Seller's
business, assets, properties, goodwill and rights (the "Seller's Assets"); and
WHEREAS, the Agreement requires that Seller execute and deliver this
Undertaking pursuant to which the rights of Sellers compete against the Company
or disclose the Company's confidential information is restricted so as to
protect the Company's proprietary rights and interests.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt of which by the undersigned is hereby
acknowledged, and in order to induce the Company to purchase the Seller's Assets
pursuant to the terms of the Agreement, the undersigned hereby undertakes and
agrees as follows:
1. Non-Competition. The undersigned agrees that he will not,
for a period of two (2) years from the date of the closing of the
transactions contemplated by the Agreement (hereinafter called the
"Closing"), or, if the undersigned shall be or become an employee of
the Company, for a period of one (1) year after the termination of
undersigned's employment, whichever is later (the "Limited Period"),
directly, or indirectly, constructively or beneficially, anywhere in
the United States or Canada or within the geographical area or
territory where the business of Seller is presently being conducted or
may from time to time be conducted by the Company during the Limited
Period, own, manage, operate or control, or participate in the
ownership, management, operation or control of, or be connected with or
have any interest in, as a stockholder, director, officer, employee,
agent, consultant, partner, officer, employee, agent, consultant,
partner or otherwise, (a) any business which manufactures, produces,
sell or distributes carpet cleaning solutions, solvents, chemicals,
formulas, tools or equipment or any other products similar to those
that have been manufactured, produced, sold or distributed by the
Company or which are competitive therewith or (b) any other business
which is competitive
<PAGE> 2
with any business conducted by the Company or any of its subsidiaries
during the Limited Period; provided, however, that nothing contained
herein shall prohibit the undersigned from owning (beneficially or
record title) less than 5% of any class of securities listed on a
national securities exchange or traded publicly in the over-the-counter
market. If any of the provisions of this paragraph is held to be
unenforceable because of the scope, duration or area of its
applicability, the court making such determination shall have the power
to modify such scope, duration or area or all of them, and such
provision shall then be applicable in such modified form.
2. Confidentiality. Seller shall not disclose to any third
party or use in any way for his own or another's benefit any of the
Company's Confidential Information as defined herein. Seller shall not
copy or create documents containing Company's Confidential Information
without the prior written approval of Company. All such copies and
documents shall be returned to Company or destroyed upon Company's
request. For purposes of this Agreement "Confidential Information"
includes, but is not limited to, intellectual property, customer names
or lists, the names or any lists of any employees, consultants,
contractors or advisors, any strategies, plans, forecasts, systems,
processes, procedures, techniques, methods, technologies, software,
hardware, ideas, products, specifications, data, formulas, patterns,
compilations, programs, devices, methods, contracts, records, manuals,
policies, financial information and any other business information;
provided, however, that the foregoing shall not be considered to be
confidential if and to the extent that it is publicly known or
nonproprietary generic knowledge. Seller acknowledges that Company owns
such Confidential Information and that Seller is not acquiring any
right, title or interest in or to such Confidential Information.
3. Continuity of Business. The undersigned will use his best
efforts to preserve the business of Seller, to keep available to the
Company the services of Seller's present employees and agents and to
preserve for the Company Seller's present business relations with its
suppliers, distributors, customers and others, and the undersigned
shall not, either before or after the Closing, commit any act, or in
any way assist others to commit any act, which will injure the Company
or the business heretofore conducted by Seller.
4. Enforcement. Since the Company will be irreparably damaged
if the provisions hereof are not specifically enforced, the Company
shall be entitled to an injunction restraining any violation of this
Undertaking by the undersigned (without any bond or other security
being required), or any other appropriate decree of specific
performance. Such remedies shall not be exclusive and shall be in
addition to any other remedy which the Company may have.
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<PAGE> 3
This Undertaking shall inure to the benefit of the Company and its
successors and assigns, shall be binding upon the undersigned and his or its
successors and assigns and may not be modified or terminated orally.
SELLER:
---------------------------------
MICHAEL SHURTLIFF, doing business
under the name Protech Carpet Cleaning
and Flood Restoration
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<PAGE> 1
Exhibit 10.22
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is entered into as of the
30th day of April, 1998, by and between Reed Thomas Buley, doing business under
the name Complete Carpet Service, having a principal office at 2526 Manana,
Suite 203-B, Dallas, Texas 75220, and his wife Lana Beth Buley (collectively
referred to as "Seller"), and Venturi Technology Enterprises, Inc., a Nevada
corporation, having its principal office at 1327 North State Street, Orem, Utah
84057 ("Purchaser").
WHEREAS, Seller owns and operates a carpet cleaning business located in
the Dallas, Texas area;
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser the Seller's Assets connected with the Seller's business in
exchange for Purchaser's common stock upon the terms described in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties agree as follows:
1. Purchase and Sale of Business. Seller shall sell to Purchaser,
and Purchaser shall purchase from Seller all of Seller's interest in all the
business assets, goodwill and rights owned by Seller and used in the operation
of Seller's business ("Seller's Assets"), including (i) the right to use
Seller's business name, (ii) the assets listed in the Bill of Sale and
Assignment attached as Exhibit "A", (iii) the assets listed on the Balance Sheet
described in Section 5.3, except for assets disposed of in the ordinary course
of Seller's business between the Balance Sheet Date and the Closing Date, and
(iv) all patents, licenses, trademarks, service marks, service names, trade
names, copyrights, and applications therefor. Seller shall transfer Seller's
Assets free and clear of all liabilities and liens except as provided by this
Agreement.
2. Payment for Seller's Assets.
2.1 Stock for Seller's Assets. As full payment for Seller's
Assets, Purchaser shall, at the Closing, cause to be issued to Seller Seven
Thousand Five Hundred (7,500) shares of Purchaser's $.001 par value common stock
(the "Shares").
2.2 Restricted Stock. The Shares issued to Seller under this
Agreement have not been registered with the Securities and Exchange Commission,
nor have the Shares been qualified under the securities laws of any state. The
Seller acknowledges that the Shares are subject to the following restriction
which will be printed in the following form on the certificates representing the
Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE
(THE "LAW"). SUCH SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND
<PAGE> 2
NEITHER SAID SHARES NOR ANY INTEREST THEREIN MAY BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION
UNDER THE LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED AS TO SAID SALE OR OFFER.
Seller represents the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Seller is acquiring
the Shares for its own account, for investment, and not for resale in connection
with any distribution thereof. Seller has such knowledge and experience in
business and financial matters that it is capable of evaluating the risks of
obtaining the Shares. Seller understands the speculative nature of the Shares.
Seller has adequate net worth and means to provide for its current needs and to
sustain a complete loss of its investment. Seller has no need of liquidity of
its investment. Seller understands that at present no public market exists, and
that a public market may never exist, for the Shares and that the Purchaser is
under no obligation to provide a market for the Shares.
2.3 Restriction on Resale. Except as provided below, Seller shall
not, without the prior written consent of the Purchaser, offer for sale, sell,
pledge, hypothecate or otherwise dispose of, directly or indirectly, any of the
Shares, in any manner whatsoever, whether pursuant to SEC Rule 144 or otherwise,
prior to the date that is two (1) year after the Closing Date; provided however,
that a certain number of Shares shall be released from this restriction on the
following schedule:
5% of the total initial amount of the Shares shall be
released each month during the thirteenth (13th)
through sixteenth (16th) month after the Closing
Date;
8% of the total initial amount of the Shares shall be
released each month during the seventeenth (17th)
through twenty-first (21st) month after the Closing
Date; and
10% of the total initial amount of the Shares shall
be released each month during the twenty-second
(22nd) through twenty-fourth (24th) month after the
Closing Date.
The certificates representing the Shares shall contain, for so long as this
restriction remains in effect, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT
BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE THAT THE SHARES MAY NOT BE
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<PAGE> 3
OFFERED OR SOLD FOR A CERTAIN PERIOD OF TIME AFTER THE DATE OF
ISSUANCE.
2.4 Right of Rescission. Either party may rescind this Agreement
by personally delivering a written notice of rescission to the other party. The
rescission cannot occur earlier than sixty days after the Closing Date, and it
cannot occur later than ninety days after the Closing Date. If there is a
rescission, each party shall return as close as reasonably possible the other
party to its position prior to the Closing. Specifically, Seller shall return
the stock certificates and shall assume the liabilities assumed by Purchaser on
behalf of Seller, and Purchaser shall return Seller's Assets (or their net
value). The terms of any Non-Competition or Non-Disclosure agreements shall
continue in effect regardless of a rescission.
2.5 Consent to Dilution. Seller understands that Purchaser plans
to acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Seller understands
and consents that future issuance of stock will dilute Seller's proportionate
ownership of Purchaser.
2.6 Liabilities Undertaking. At the Closing Purchaser shall sign a
Liabilities Undertaking in the form of the attached Exhibit "B," pursuant to
which Purchaser shall assume to pay or discharge the obligations set forth
therein.
3. Closing. The Closing shall take place at 10:00 a.m. on the
18th day of May, 1998, at Purchaser's office or at such other time and place as
the parties agree, but in no event to a date later than May 18, 1998.
4. Seller's Obligations at Closing; Further Assurances.
4.1 At the Closing, Seller shall deliver to Purchaser:
4.1.2 a Bill of Sale and Assignment signed by Seller in the
form attached as Exhibit "A";
4.1.3 any other instruments of assignment and transfer
necessary to vest in Purchaser good and marketable title to Seller's
Assets;
4.1.4 all contracts and records relating to Seller's Assets;
and
4.1.5 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and
Seller must sign and/or deliver any documents necessary to transfer and assign
to Purchaser, and confirm Purchaser's title to Seller's Assets, and to assist
Purchaser in the exercise of all rights thereto. After the Closing, Seller shall
have access to the books and records pertaining to its operations.
-3-
<PAGE> 4
4.3 Purchaser shall have the right to collect all receivables
transferred to Purchaser under this Agreement and to endorse Seller's name on
checks received for such receivables. Seller shall transfer to Purchaser any
cash or other property Seller receives for such receivables.
4.4 Seller shall pay any income taxes payable as a result of this
transaction, and shall indemnify Purchaser from any income tax liability that
may result from this transaction.
4.5 The parties agree to allocate the purchase price among the
Seller's Assets as set forth in Schedule 4.5.
5. Representations and Warranties by Seller. Seller represents
and warrants to Purchaser as follows:
5.1 Organization, Standing and Qualification. Seller is an
individual doing business as a sole proprietorship under the business name
"Complete Carpet Service." Seller is not a corporation, limited liability
company or a partnership. Seller is authorized to carry on its business as now
conducted and to own and operate its properties in the places where such
properties are now located; and Seller is authorized and licensed to do business
in the states where such is required.
5.2 Execution and Performance of Agreement; Authority. The
performance of this Agreement by Seller will not result in a default or breach
of any other agreement to which Seller is a party. Seller has the authority to
enter into this Agreement.
5.3 Financial Statements. The copies of the following financial
statements given to Purchaser and prepared by Seller (called the "Financial
Statements") are complete and correct, have been prepared from the records of
Seller in accordance with generally accepted accounting principles and fairly
present the financial condition of Seller as of their dates and the results of
its operations for the periods covered thereby:
5.3.1 an unaudited balance sheet of Seller (the "Balance
Sheet") as of March 15th, 19_, (the "Balance Sheet Date") and Seller's
unaudited income or cash flow statement for the 3 March week period
ended 1998.
Such statements of earnings do not contain any items of special income or any
other income not earned in the ordinary course of business except as specified
therein, and such interim financial statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
5.4 Absence of Undisclosed Liabilities. Except as reflected on the
Balance Sheet, as of the Balance Sheet Date Seller had no debts or obligations
of any nature whatsoever, including any tax liabilities incurred in respect of
Seller's income, or its period prior to the close of business on the Balance
Sheet Date or any other debts or obligations relating to any act, omission or
other condition which occurred or existed on or before the Balance Sheet Date.
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<PAGE> 5
5.5 Taxes. All taxes and assessments imposed by any taxing
authority, whether federal, state, local, foreign or otherwise which are due or
payable by Seller, and all interest and penalties thereon, have been paid in
full. All tax returns required to be filed have been accurately prepared and
filed and all deposits required to be made by Seller with respect to employees'
withholding taxes have been made.
5.6 Absence of Changes or Events. Except as may be set forth in
Schedule 5.6, since the Balance Sheet Date, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.
5.7 Litigation. Except as set forth in Schedule 5.7 there is no
claim, order, investigation or other proceeding, against Seller, its employees,
its properties, or business or the transactions contemplated by this Agreement,
and Seller knows of no basis for the same.
5.8 Compliance With Laws and Other Instruments. Except as set
forth in Schedule 5.8, Seller has complied with all laws applicable to its
business. The ownership and use of Seller's Assets as well as the conduct of its
business will not conflict with the rights of any other person or entity, and
will not cause a default under any agreement to which Seller is a party. Seller
is not aware of any proposed laws, condemnations or other proceedings which
would affect its business or Seller's Assets.
5.9 Title to Properties. Seller has good title to Seller's Assets.
None of Seller's Assets are subject to any lien, lease, license, or adverse
claim except (i) as expressly set forth in the Balance Sheet as securing
specific liabilities or as otherwise expressly permitted by the terms of this
Agreement, or (ii) insubstantial imperfections of title which have arisen in the
ordinary course of business. Seller's Assets are in good operating condition and
repair, are suitable for the purposes used, and are adequate for all current
operations of Seller.
5.10 Environmental Compliance. Except as set forth in Schedule
5.10, Seller's business is being operated in compliance with all environmental
laws and with all terms of required permits and licenses.
5.11 Environmental Notices. Except as set forth in Schedule 5.11,
Seller is not aware of any circumstances that may interfere with its compliance
with environmental laws or which may give rise to any liability, or which would
otherwise form the basis of any claim or investigation, and that is based on
Seller's manufacture, storage, disposal, transport, or handling, or the release
into the environment, of any hazardous substance.
5.12 Environmental Claims. Except as set forth in Schedule 5.12,
there is no claim, investigation, or proceeding pending or threatened against
Seller, in connection with the Seller's Assets or its business relating to
environmental laws.
5.13 Environmental Permits. Except as set forth in Schedule 5.13,
Seller currently maintains all material government permits, licenses and
agreements required to operate Seller's Assets and business, and has complied
with all requirements relating thereto.
-5-
<PAGE> 6
5.14 Schedules. Schedule 5.14 contains a complete list and
description of:
5.14.1 All real property in which Seller has any ownership or
other interest and which is used in connection with the operation of
its business.
5.14.2 As of a date no earlier than May 18th 1998, all of
Seller's receivables with detailed information on each receivable which
has been outstanding more than 30 days.
5.14.3 All equipment, motor vehicles, and other personal
property (other than inventory and supplies), owned or leased by Seller
setting forth a summary description of all leases, claims, and
conditions relating thereto.
5.14.4 All patents, trademarks, service marks, service names,
trade names, and copyrights together with any registrations,
applications and licenses related thereto, owned by Seller or used in
the operation of Seller's business.
5.14.5 All insurance policies insuring Seller or its assets,
specifying the name of the insurer, the risk insured against, the
limits of coverage, the deductible amount, the premium rate and the
date through which coverage will continue by virtue of premiums already
paid.
5.14.6 All contracts or agreements relating to the Assets to
which Seller is a party.
5.14.7 All loan agreements, conditional sale agreements,
security agreements, guaranties, and leases to which Seller is a party.
5.14.8 All employment and consulting agreements, compensation
plans, pension plans or retirement plans, group life, health and
accident insurance and other employee benefit plans, including holiday,
vacation, Christmas and other bonus practices, to which Seller is a
party.
5.14.9 The name of all banks where Seller has accounts or safe
deposit boxes and the names of all persons authorized to sign on the
accounts or have access to the boxes; and the names of all persons
holding tax or other powers of attorney from Seller and a summary of
the terms thereof.
All of the agreements, leases and licenses required to be listed on Schedule
5.14 (other than those which have been fully performed) are valid and binding,
and except as otherwise specified in Schedule 5.14, assignable to Purchaser
without the consent of any other party so
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<PAGE> 7
that, after assignment to Purchaser, Purchaser will be entitled to the full
benefits thereof. Except as disclosed in Schedule 5.14, no payment required to
be made under any such agreement, lease or license has been prepaid more than 30
days prior its due date, and there is not any default, or event which would
constitute a default, and none of such agreements, leases or licenses is unduly
burdensome or adverse to Seller's Assets or business or likely to result in any
material loss or liability. None of Seller's existing or completed contracts is
subject to renegotiation with any government body.
5.15 No Guaranties. No obligation of Seller is guaranteed by any
other person or entity, nor has Seller guaranteed any obligation of any other
person or entity.
5.16 Receivables. All Seller's receivables have arisen only from
transactions in the ordinary course of business and shall be fully collected
within 90 days after each receivable arose, without offset or resort to
litigation, except for an allowance for doubtful accounts computed as a
percentage of sales consistent with prior practices as reflected on the most
recent annual Financial Statement.
5.17 Records. The accounting books of Seller are complete and
correct, and no transactions which are required to be recorded therein have been
omitted.
5.18 Absence of Certain Business Practices. Neither Seller nor any
employee or agent of Seller has within the past five years agreed to give any
gift to any customer, supplier, government employee or other person who may be
in a position to help or hinder the business of Seller which (i) might subject
Seller to liability in any proceeding, (ii) if not given in the past, might have
had an adverse effect on the Seller's Assets or business as reflected in the
Financial Statements, or (iii) if not continued in the future, might adversely
affect Seller's Assets or business, or which might subject Seller to liability
in any proceeding.
5.19 Disclosure. All of Seller's representations made in this
Agreement and its related documents are true and contain no untrue statements
and do not omit important facts. Seller has disclosed to Purchaser in writing
all the adverse facts concerning the Seller's Assets and its business. The
effectiveness of the representations are not altered or waived by the fact that
Purchaser might have known that any of the representations are inaccurate.
5.20 No Conflict. Performance of this Agreement by Seller will not
conflict with any regulations or agreements to which Seller is a party. No
authorization or filing, which has not already been completed, is necessary for
Seller to perform this Agreement.
6. Representations and Warranties by Purchaser. Purchaser
represents and warrants to Seller as follows:
6.1 Organization. Purchaser is a corporation organized and in good
standing under the laws of the State of Nevada and has full authority to enter
into this Agreement and to carry on its business and to own and operate its
properties.
-7-
<PAGE> 8
6.2 Authorization and Approval of Agreement. All actions required
to be taken by Purchaser relating to the singing of this Agreement shall have
been taken at or prior to the Closing.
6.3 Execution and Performance of Agreement. The performance of
this Agreement by Purchaser will not result in a default of any Agreement to
which Purchaser is a party. Purchaser has the authority to enter into this
Agreement.
6.4 Litigation. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. Conduct of Business Prior to Closing.
7.1 Prior to the Closing, Seller shall conduct its business only
in a manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of Seller intact, (ii) to keep available the services
of Seller's present employees, agents and independent contractors, (iii) to
preserve the goodwill of Seller's suppliers, customers, landlords and others
having business relations with it, and (iv) to cooperate with Purchaser and
assist in obtaining the consent of any party to any lease or contract with
Seller where the consent of such party may be required by reason of this
Agreement.
7.2 If there is a change in any information contained in this
Agreement or its related documents prior to closing, Seller shall give Purchaser
prompt written notice.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) canceling agreements to which Seller is a party,
including purchase orders and commitments for capital expenditures or
improvements, (ii) discontinuing particular items or operations and (iii)
purchasing, pricing or selling policy (including selling merchandise at
discounts); provided, however, that nothing contained in this Section shall
require Seller to take action that is likely to result in a penalty or claim for
damages against Seller, or in losses to Seller, or to interfere with the conduct
of Seller's business consistent with prior practice, or to result in a breach by
Seller of any of its representations contained in this Agreement (unless the
breach is waived by Purchaser).
8. Access to Information and Documents. Upon Purchaser's request,
Seller shall give Purchaser access to Seller's personnel and all its properties,
documents and records and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same prior to the
Closing. The information gathered by Purchaser under this Section shall not
affect Purchaser's right to rely on the representations made in this Agreement.
9. Employment Matters.
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<PAGE> 9
9.1 Purchaser intends to provide employment to as many of Seller's
current employees as possible. Schedule 9.1 is a list of all Seller's employees
as of the date of this Agreement, including the compensation for each employee.
Prior to the Closing Date, Purchaser shall provide Seller a list of employees
whom Purchaser does not intend to employ after the Closing Date. All remaining
employees shall become the employees of Purchaser on the Closing Date.
9.2 Within a reasonable period following the Closing Date
Purchaser shall provide training and support to Seller's employees to enable
them to use and sell Purchaser's products and services.
10. Bulk Sales Compliance. Purchaser waives Seller's compliance
with the Bulk Sales Law of any state. Seller agrees to pay all claims of
creditors which could be asserted against Purchaser because of such
noncompliance unless such claims are assumed by Purchaser under this Agreement.
Seller indemnifies Purchaser against any liability or expense, including
attorneys' fees, incurred by Purchaser by reason of the failure of Seller to pay
such claims.
11. Non-Competition Agreement. Seller shall sign at or prior to
the Closing a Non-Competition and Continuity of Business Dealings Undertaking
in the form of Exhibit "C."
12. Conditions to Purchaser's Obligations. All obligations of
Purchaser under this Agreement are subject to, at Purchaser's option, each of
the following conditions at or prior to the Closing, and Seller shall use its
best efforts to cause each condition to be fulfilled:
13.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
13.2 All duties required by this Agreement to be performed by
Seller at or before the Closing shall be performed.
13.3 Since the date of this Agreement there shall be no material
adverse change in the condition of Seller's Assets or its business.
13.4 All documents required to be delivered to Purchaser at or
prior to the Closing shall be delivered.
13.5 Seller shall obtain written consents to the transfer or
assignment to Purchaser of all agreements of Seller where the consent of any
other party may be required.
14. Conditions Precedent to Seller's Obligations. All obligations
of Seller at the Closing are subject to, at Seller's option, each of the
following conditions at or prior to the Closing, and Purchaser shall use its
best efforts to cause each condition to be fulfilled:
-9-
<PAGE> 10
14.1 All representations of Purchaser contained in this Agreement
or the related documents shall be correct when made and as of the Closing.
14.2 All duties required by this Agreement to be performed by
Purchaser at or before the Closing shall be performed.
13. Indemnification.
15.1 Seller indemnifies and agrees to hold Purchaser harmless from:
15.1.1 any loss suffered by Purchaser because a representation
was not true, a warranty was breached or a duty was not performed by
Seller contained in this Agreement or a related document;
15.1.2 any loss suffered by Purchaser in connection with any
of Seller's liabilities which are not assumed by Purchaser under the
Liabilities Undertaking;
15.1.3 any liabilities or debts of Seller, which exist as of
the Balance Sheet Date or which arise after that date but which are
based upon any transaction, state of facts or other condition which
occurred on or before the Balance Sheet Date, except to the extent
reflected on the Balance Sheet;
15.1.4 any liabilities or debts of Seller, which exist as of
the Closing Date or which arise after that date but which are based
upon any transaction, state of facts or other condition which occurred
on or before the Closing Date, except to the extent (i) reflected on
the Balance Sheet or incurred after the Balance Sheet Date in
connection with a purchase in the ordinary course of Seller's business
and in conformity with the representations contained in this Agreement,
and (ii) assumed by Purchaser under the terms of the Liabilities
Undertaking; and
15.1.5 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
15.2 Purchaser hereby agrees to indemnify and hold Seller harmless
from:
15.2.1 any loss suffered by Seller because a representation
was not true, a warranty was breached or a duty was not performed by
Purchaser contained in this Agreement or a related document;
15.2.2 any liabilities or debts of Seller assumed by Purchaser
under this Agreement; and
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<PAGE> 11
15.2.3 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
16. Nature and Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall remain
effective after the Closing.
17. Notices. Any notices described under this Agreement shall be
in writing and shall be deemed given when personally delivered or mailed by
first class registered mail, return receipt requested, addressed to the parties
at the addresses set forth above.
18. Arbitration.
18.1 Any action, dispute, controversy or claim between or
among the Parties, whether sounding in contract, tort, or otherwise ("Dispute")
shall, at the request of any Party, be resolved by arbitration as set forth
below, and shall include any Dispute arising out of or relating to this
Agreement or any agreements or instruments relating to this Agreement or
delivered in connection with this Agreement. Any such Dispute shall be
determined by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The arbitration proceedings shall be
conducted in Salt Lake City, Utah. The arbitrator(s) shall have the
qualifications set forth in Section 18.2. All statutes of limitation which would
otherwise be applicable in a judicial action brought by a Party shall apply to
any arbitration proceeding under this Agreement.
18.2 The arbitrator(s) shall be selected in accordance with
the rules of the American Arbitration Association from panels maintained by the
Association. A single arbitrator shall be knowledgeable in the subject matter of
the arbitration proceeding. If more than one arbitrator is selected, at least
one of the arbitrators must be knowledgeable in the subject matter of the
Dispute and at least one of whom must be a practicing attorney. If more than one
arbitrator is selected, the controversy shall be decided by a majority vote of
the arbitrators. The arbitrator(s) shall award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrators' fees, and court
costs). The arbitrator(s) also may grant provisional or ancillary remedies such
as, for example, injunctive relief, attachment, or the appointment of a
receiver, either during the pendency of the arbitration proceeding or as part of
the arbitration award.
18.3 Notwithstanding the applicability of other law to any
agreements or instruments between or among the Parties, the Federal Arbitration
Act, 9 U.S.C. Sec. 1 et seq. Shall apply to the construction and interpretation
of this Agreement.
18.4 The Parties acknowledge that they have read and
understand the following disclosures:
ARBITRATION CAN BE FINAL AND BINDING ON THE PARTIES.
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<PAGE> 12
THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT,
INCLUDING THEIR RIGHT TO A JURY TRIAL.
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND
DIFFERENT FROM COURT PROCEEDINGS.
ARBITRATORS' AWARDS ARE NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO
APPEAL OR TO SEEK MODIFICATION OF RULINGS BY ARBITRATORS
IS STRICTLY LIMITED.
19. Legal and Other Costs. In the event that any party defaults in
its obligations under this Agreement and, as a result thereof, another party
seeks to legally enforce its rights hereunder against the defaulting party,
then, in addition to all damages and other remedies to which the non-defaulting
party is entitled by reason of such default, the defaulting party shall be
liable for and shall promptly pay to the non-defaulting party an amount equal to
all costs and expenses (including reasonable attorneys' fees) paid or incurred
by the non-defaulting party in connection with such enforcement.
20. Miscellaneous.
20.1 This writing contains the entire agreement of the parties
concerning the subject matter hereof and it may not be amended or terminated
except by a written agreement signed by all the parties.
20.2 No waiver of any default is valid unless in writing and signed
by the waiving party, and no such waiver shall be deemed a waiver of any
subsequent default.
20.3 This Agreement shall be binding upon and inure to the benefit
of each corporate party, its successors and assigns, and each individual party
hereto and his/her heirs, personal representatives, successors and assigns.
20.4 The paragraph headings are for the purposes of convenience
only and are not intended to define or limit the contents of the paragraphs.
20.5 Each party shall cooperate and take such further action as may
be reasonably requested by any other party to carry out the provisions and
purposes of this Agreement.
20.6 This Agreement may be executed in one or more counterparts,
all of which taken together shall be deemed one original.
20.7 This Agreement and any amendments shall be governed by and
construed in accordance with law of the State of Utah.
20.9 Any information revealed pursuant to this Agreement or
previously in the course of negotiations shall be held in confidence and solely
for the purpose of consummating this Agreement in allowing the parties to
exercise prudent care. If this
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<PAGE> 13
Agreement is not consummated, no further use shall be made of such information
(except to the extent such information was already known prior to this
Agreement) and the parties may be held accountable for any unauthorized use. If
this Agreement is not consummated, the parties shall return all documents
received from any party in connection with this Agreement. If this Agreement is
consummated, neither party shall disclose any information concerning the other
party's business or the terms of this Agreement except (i) as approved by the
other party, (ii) as necessary for the conduct of the Purchaser's or Seller's
business, (iii) as required by law, or (iv) as is ascertainable from public
information.
20.10 Each provision of this Agreement shall be interpreted in such a
way as to be valid under all laws, but in case any of the provisions shall be
held to be illegal or unenforceable, such illegality or unenforceability shall
not affect any other provision and this Agreement shall be interpreted as if the
invalid provision was not included unless the absence of such provision would
make completing the transactions contemplated hereby unreasonable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first above written.
SELLER:
REED THOMAS BULEY, doing business as
Complete Carpet Service
/s/ Reed Thomas Buley
------------------------------------
Reed Thomas Buley
/s/ Lana Beth Buley
------------------------------------
Lana Beth Buley, his wife
PURCHASER:
VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation
By: /s/ John Hopkins
--------------------------------
Its: Pres.
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<PAGE> 14
EXHIBIT "A"
Bill of Sale and Assignment
<PAGE> 15
EXHIBIT "B"
Liabilities Undertaking
<PAGE> 16
EXHIBIT "C"
Non-Competition and Continuity of Business Dealings Undertaking
<PAGE> 17
Schedule 4.5
Allocation of Purchase Price
<PAGE> 18
Schedule 5.6
Material Changes or Events
<PAGE> 19
Schedule 5.7
Litigation
<PAGE> 20
Schedule 5.8
Compliance With Laws and Other Instruments
<PAGE> 21
Schedule 5.10
Environmental Compliance
<PAGE> 22
Schedule 5.11
Environmental Notices
<PAGE> 23
Schedule 5.12
Environmental Claims
<PAGE> 24
Schedule 5.13
Environmental Permits
<PAGE> 25
Schedule 5.14
Schedules of Assets, Contracts, etc.
<PAGE> 26
Schedule 9.1
Seller's Employees
<PAGE> 1
EXHIBIT 10.23
BILL OF SALE AND ASSIGNMENT
Reed Thomas Buley, doing business as a sole proprietorship under the
name Complete Carpet Service, and his wife Lana Beth Buley (hereinafter
collectively called "Assignor"), for One Dollar ($1.00) and other valuable
consideration to it in hand paid, receipt of which is hereby acknowledged, by
these presents does sell, assign, transfer and convey unto Venturi Technology
Enterprises, Inc., a Nevada corporation (hereinafter called "Assignee"), its
successors and assigns, the following described property, leases, licenses and
intangible property:
All tangible and intangible property, leases and licenses of
every kind and description and wherever situated owned by Assignor or
to which Assignor has any right, title or interest on the date hereof,
excepting only those properties of Assignor listed on Schedule "A"
annexed hereto, and including, without limitation, all of Seller's
Assets as defined in a certain Agreement of Purchase and Sale of
Assets, dated April __, 1998, between Assignor as Seller and Assignee
as Purchaser (the "Agreement"), which includes, without limitation, the
following:
(i) All cash on hand and in bank accounts, notes and loans
receivable from customers, employees and others, marketable securities
and investments, merchandise and all other inventories, packaging and
shipping materials and other supplies and supply inventories, prepaid
insurance, prepaid interest and other prepaid items and deposits, cash
surrender values of all life insurance policies, contracts, choses in
action and causes of action, claims and rights of recovery or setoff of
every kind or character arising out of transactions or events occurring
on or prior to the date hereof irrespective of the date on which any
such cause of action, claim or right may arise or accrue;
(ii) All fixed assets including, without limitation,
leaseholds and leasehold improvements, fixtures, machinery, tools,
equipment, cars and trucks;
(iii) All inventions, patents, transferable licenses,
transferable permits and transferable franchises, trademarks, trade
names, service marks, service names, copyrights, know-how, stationery
and other imprinted material and office supplies, the right to receive
mail and other communications and shipment of merchandise addressed to
Assignor, its goodwill as a going concern, and the Assignor's entire
right to use the name "Complete Carpet Service" or any similar name;
(iv) All Books and records of Assignor;
(v) All contracts, agreements and understandings to which
Assignor is a party or by which Assignor may have any rights or
obligations; and
(vi) All rights to use vendors, suppliers, dealers, brokers
and others, and all rights to deal with and sell to customers, to use
premises used by Assignor, and to rename, sell, buy, lease or assemble
all assets of Assignor.
<PAGE> 2
Assignor hereby authorizes and grants its power of attorney to Assignee
and appoints Assignee and the officers thereof as Assignor's attorney-in-fact to
take any appropriate action in connection with any of said rights, claims,
causes of action and property, in the name of Assignor or in its own or any
other name but at its own expense, it being understood that this authorization
and power of attorney are coupled with an interest and irrevocable.
Assignee hereby assumes and agrees to keep, perform and fulfill all of
Assignor's obligations arising after the date hereof with respect to any of the
leases, licenses and intangible property transferred and assigned hereunder.
TO HAVE AND TO HOLD said rights, claims, causes of action, property,
assets, business and goodwill, as a going concern, unto the said Assignee, its
successors and assigns, to and for its use forever.
AND, Assignor does hereby warrant, covenant and agree that it:
(a) has good and marketable title to the properties and assets
hereby sold, assigned, transferred, conveyed and delivered, subject to
such liens and other encumbrances as are disclosed in the Agreement or
any schedules or exhibits thereto; and
(b) will warrant and defend the sale of, and title to, said
properties and assets against all and every person or persons
whomsoever claiming or to claim against any or all of the same.
IN WITNESS WHEREOF, Assignor has caused this instrument to be duly
executed this day of April, 1998.
ASSIGNOR:
---------------------------------------------
Reed Thomas Buley, doing business as Complete
Carpet Service
---------------------------------------------
Lana Beth Buley, his wife
ASSIGNEE:
VENTURI TECHNOLOGY ENTERPRISES, INC., a
Nevada corporation
By:
------------------------------------------
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<PAGE> 3
Its:
-3-
<PAGE> 4
SCHEDULE "A"
(To Bill of Sale)
Excluded Property and Assets
<PAGE> 1
EXHIBIT 10.24
LIABILITIES UNDERTAKING
THIS LIABILITIES UNDERTAKING dated April ___, 1998, by VENTURI
TECHNOLOGY ENTERPRISES, INC., a Nevada corporation (hereinafter called the
"Purchaser"), and Reed Thomas Buley, doing business as a sole proprietorship
under the name Complete Carpet Service, with its principal office at 2526
Manana, Suite 203-B, and his wife Lana Beth Buley (collectively referred to as
"Seller").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement of Purchase and Sale of Assets dated
April ___, 1998, among Purchaser and Seller (the "Agreement"), Seller has
concurrently herewith sold, assigned, transferred, conveyed and delivered to
Purchaser substantially all of the business, assets, properties, goodwill and
rights of Seller as a going concern (the "Seller's Assets"); and
WHEREAS, in partial consideration therefor, the Agreement requires
Purchaser to execute and deliver to Seller this Undertaking;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which by Purchaser is hereby
acknowledged, Purchaser hereby agrees as follows:
1. Purchaser hereby undertakes, assumes and agrees, subject to the limitations
contained herein, to perform, pay or discharge the following:
(a) only those unpaid debts and liabilities of Seller existing
at the Closing that are specifically set forth on Schedule "A" attached
hereto;
(b) only those unperformed and unfulfilled obligations which
are required to be performed and fulfilled by Seller under the terms of
executory written contracts, agreements, leases, licenses, commitments
and undertakings that are listed in Schedule "B" attached hereto.
2. Notwithstanding anything to the contrary contained above, the debts,
liabilities and obligations assumed by Purchaser under Paragraph 1 hereof shall
not include any:
(a) legal, accounting, brokerage, finder's fee, taxes or other
expenses incurred by Seller in connection with the Agreement or the
consummation of the transactions contemplated; or
(b) federal, state or local income, franchise, excise, sales,
use, property, payroll or similar taxes imposed on Seller except to the
extent that (i) such taxes constitute debts or liabilities of Seller
which would be assumed by Purchaser under the Provisions of paragraph
1(a) above, (ii) Purchaser gets the benefits of all deposits, escrow
accounts or other payments made or collected by such Seller on account
of or
<PAGE> 2
with respect to such tax liabilities; and (iii) the Seller complies
with each of the following conditions:
(A) The Seller shall afford Purchaser the right, at
its option, to assume the entire control of the preparation
and filing of all tax returns with respect thereto, and the
Seller shall keep Purchaser fully advised as to any and all
investigations, audits or other proceedings or communications
by any taxing agent or authority which may affect the amount
of the tax liabilities being assumed hereunder; and
(B) The Seller shall afford Purchaser the right, at
its option, to assume the entire control of any such audit or
other proceeding insofar as it may relate to the liabilities
of the Seller assumed hereunder, including the defense,
compromise or settlement thereof, and in connection therewith
the Seller shall cooperate fully and make available to
Purchaser all information under its control relating thereto
which Purchaser may reasonably request and shall execute and
deliver to Purchaser such powers-of-attorney or other
documents which Purchaser may reasonably deem necessary or
desirable to effectuate the foregoing.
(c) liabilities or obligations of Seller resulting or arising
from claims for personal injury or property damage or out of any breach
of any nonperformance by Seller of any contract, commitment or
obligation imposed by law or otherwise, except to the extent covered by
insurance proceeds payable to or on behalf of Purchaser; or
(d) debts, liabilities or obligations arising under any
contract which has not been assigned to Purchaser so that Purchaser
will enjoy the full benefits thereunder or which is listed in any
Schedule to the Agreement and specifically designated thereon as "Not
Assumed"; or
(e) debts, liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
date of the Closing or which arise after the Closing but which are
based upon or arise from any act, omission, transaction, circumstance,
sale of goods or services, state of facts or other condition which
occurred or existed on or before the date of the Closing, whether or
not then known, due or payable, except to the extent specifically set
forth on Schedule "A" or Schedule "B" attached hereto in connection
with the purchase of goods or services in the ordinary course of
Seller's business and in conformity with the representations,
warranties and covenants contained in the Agreement; or
(f) accounts payable incurred by Seller that are more than
sixty (60) days past due as of the date of the Closing.
-2-
<PAGE> 3
3. Nothing contained herein shall require Purchaser to pay or discharge
any debts or obligations expressly assumed hereby so long as Purchaser shall in
good faith contest or cause to be contested the amount or validity thereof.
4. Other than as specifically stated above or in the Agreement,
Purchaser assumes no debt, liability or obligation of Seller by this
Undertaking, and it is expressly understood and agreed that all debts,
liabilities and obligations not assumed hereunder by Purchaser shall remain the
sole obligation of Seller, successors and assigns, and no person, firm or
corporation other than Seller shall have any rights under this Undertaking or
the provisions herein.
VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation
By:_______________________________________________
Its:
-3-
<PAGE> 4
SCHEDULE "A"
Debts and Liabilities Assumed by Purchaser
<PAGE> 5
SCHEDULE "B"
Unperformed and Unfulfilled Obligations Assumed by Purchaser
<PAGE> 1
EXHIBIT 10.25
NON-COMPETITION, CONFIDENTIALITY AND
CONTINUITY OF BUSINESS DEALINGS
UNDERTAKING
This NON-COMPETITION AND CONTINUITY OF BUSINESS DEALINGS UNDERTAKING
dated April ___, 1998 by Reed Thomas Buley, doing business under the name
Complete Carpet Service, in favor of VENTURI TECHNOLOGY ENTERPRISES, INC., a
Nevada corporation (hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Agreement of Purchase and Sale
of Assets, dated April ___, 1998 (the "Agreement"), with Seller pursuant to
which the Company is to purchase and the Seller is to sell, all of Seller's
business, assets, properties, goodwill and rights (the "Seller's Assets"); and
WHEREAS, the Agreement requires that Seller execute and deliver this
Undertaking pursuant to which the rights of Sellers compete against the Company
or disclose the Company's confidential information is restricted so as to
protect the Company's proprietary rights and interests.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt of which by the undersigned is hereby
acknowledged, and in order to induce the Company to purchase the Seller's Assets
pursuant to the terms of the Agreement, the undersigned hereby undertakes and
agrees as follows:
1. Non-Competition. The undersigned agrees that he will not,
for a period of two (2) years from the date of the closing of the
transactions contemplated by the Agreement (hereinafter called the
"Closing"), or, if the undersigned shall be or become an employee of
the Company, for a period of two (2) years after the termination of
undersigned's employment, whichever is later (the "Limited Period"),
directly, or indirectly, constructively or beneficially, anywhere in
the United States or Canada or within the geographical area or
territory where the business of Seller is presently being conducted or
may from time to time be conducted by the Company during the Limited
Period, own, manage, operate or control, or participate in the
ownership, management, operation or control of, or be connected with or
have any interest in, as a stockholder, director, officer, employee,
agent, consultant, partner, officer, employee, agent, consultant,
partner or otherwise, (a) any business which manufactures, produces,
sell or distributes carpet cleaning solutions, solvents, chemicals,
formulas, tools or equipment or any other products similar to those
that have been manufactured, produced, sold or distributed by the
Company or which are competitive therewith or (b) any other business
which is competitive with any business conducted by the Company or any
of its subsidiaries during
<PAGE> 2
the Limited Period; provided, however, that nothing contained herein
shall prohibit the undersigned from owning (beneficially or record
title) less than 5% of any class of securities listed on a national
securities exchange or traded publicly in the over-the-counter market;
and provided further, that nothing contained herein shall be deemed to
prohibit the undersigned from engaging in any business that is
substantially the same in terms of techniques, customers and geographic
area as the business in which the undersigned was engaged immediately
prior to the Closing. If any provision of this paragraph is held to be
unenforceable because of the scope, duration or area of its
applicability, the court making such determination shall have the power
to modify such scope, duration or area or all of them, and such
provision shall then be applicable in such modified form.
2. Confidentiality. Seller shall not disclose to any third
party or use in any way for his own or another's benefit any of the
Company's Confidential Information as defined herein. Seller shall not
copy or create documents containing Company's Confidential Information
without the prior written approval of Company. All such copies and
documents shall be returned to Company or destroyed upon Company's
request. For purposes of this Agreement "Confidential Information"
includes, but is not limited to, intellectual property, customer names
or lists, the names or any lists of any employees, consultants,
contractors or advisors, any strategies, plans, forecasts, systems,
processes, procedures, techniques, methods, technologies, software,
hardware, ideas, products, specifications, data, formulas, patterns,
compilations, programs, devices, methods, contracts, records, manuals,
policies, financial information and any other business information;
provided, however, that the foregoing shall not be considered to be
confidential if and to the extent that it is publicly known or
nonproprietary generic knowledge. Seller acknowledges that Company owns
such Confidential Information and that Seller is not acquiring any
right, title or interest in or to such Confidential Information.
3. Continuity of Business. The undersigned will use his best
efforts to preserve the business of Seller, to keep available to the
Company the services of Seller's present employees and agents and to
preserve for the Company Seller's present business relations with its
suppliers, distributors, customers and others, and the undersigned
shall not, either before or after the Closing, commit any act, or in
any way assist others to commit any act, which will injure the Company
or the business heretofore conducted by Seller.
4. Enforcement. Since the Company will be irreparably damaged
if the provisions hereof are not specifically enforced, the Company
shall be entitled to an injunction restraining any violation of this
Undertaking by the undersigned (without any bond or other security
being required), or any other appropriate decree of specific
performance. Such remedies shall not be exclusive and shall be in
addition to any other remedy which the Company may have.
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<PAGE> 3
This Undertaking shall inure to the benefit of the Company and its
successors and assigns, shall be binding upon the undersigned and his or its
successors and assigns and may not be modified or terminated orally.
SELLER:
---------------------------------
REED THOMAS BULEY, doing business
under the name Complete Carpet Service
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<PAGE> 1
EXHIBIT 10.26
VENTURI TECHNOLOGY ENTERPRISES, INC.
1327 North State Street
Orem, Utah 84057
July 29, 1998
VIA FACSIMILE (805) 940-7025
Mr. Daniel Mark Levine
2763 West Ave. L, #170
Lancaster, California 93536
Re: Proposed Acquisition by Venturi Technology Enterprises, Inc.
of Carpet and Upholstery Cleaning Assets of Daniel Mark Levine
Dear Mr. Levine:
This letter is to set forth the terms of our proposed
acquisition of all of the assets of the carpet and upholstery cleaning business
you presently conduct in the Lancaster, California area as a sole proprietorship
under the names All Valley Carpet, All Valley Carpet and Upholstery, and All
Valley Restoration Service. If the terms of this letter are acceptable, please
sign a copy of this letter and return it to us. We will then have our attorney
prepare an Asset Purchase Agreement (the "Agreement") between Venturi Technology
Enterprises, Inc., a Nevada corporation, as the buyer ("Venturi") and Daniel
Mark Levine as the seller ("Seller").
Venturi hereby offers to purchase all of the tangible and
intangible assets owned by Seller used in the carpet and upholstery cleaning
business in the Lancaster, California area under the names All Valley Carpet,
All Valley Carpet and Upholstery, and All Valley Restoration Service, located at
2763 West Avenue L, # 170, Lancaster, California 93536 (the "Business"), on the
following terms and conditions:
1. Purchase Price. Venturi will issue a total of Five Thousand
(5,000) shares of its common stock, 0.001 par value to Seller
in exchange for all of the assets of Seller used in the
Business. The shares of stock to be issued to Seller shall be
restricted stock, and the ability of Seller to resell such
stock shall be limited both by applicable securities laws and
by certain "leak-out" provisions imposed by Venturi.
<PAGE> 2
Mr. Daniel Mark Levine
July 29, 1998
Page 2
2. Representations, Warranties and Conditions. The Agreement will
contain usual and customary representations, warranties,
covenants, and other agreements on behalf of Seller and the
Closing will be subject to usual and customary conditions,
including:
A. obtaining of necessary consents or approvals of
governmental bodies, lenders, lessors, or other third
parties;
B. absence of pending or threatened litigation regarding
the Assets, the Liabilities or the Agreement;
C. satisfactory completion of Venturi's due diligence
investigation;
D. delivery of customary legal opinions, closing
certificates and other documentation.
3. Assumption of Liabilities. Venturi will not assume any of the
debts, liabilities or obligations of Seller except as
specifically set forth in an Assumption of Liabilities
Agreement that may be executed at the time of Closing, and
Seller shall indemnify Venturi and hold Venturi harmless with
respect to any such unassumed liabilities.
4. Employment. Following the Closing, Seller shall be employed by
Venturi at an initial base salary of Five Thousand Eight
Hundred Dollars ($5,800.00) per month.
5. Noncompetition Agreement. Venturi's obligation to close shall
be conditioned on, among other things, Seller entering into a
noncompetition agreement with Buyer on terms satisfactory to
the Buyer.
6. Closing Date. The closing will take place as soon as the
conditions set forth herein are satisfied and as soon as final
documents can be prepared, but in any event no later than July
10, 1998.
<PAGE> 3
Mr. Daniel Mark Levine
July 29, 1998
Page 3
If the offer contained in this letter is acceptable to Seller, please
sign and return to Venturi a copy of this letter. Unless signed by you and
returned to Venturi by the end of the day on June 30, 1998, the offer set forth
herein shall be automatically revoked and shall become null and void.
Sincerely,
VENTURI TECHNOLOGY ENTERPRISES, INC.
By: _________________________________
John Hopkins
President
AGREED AND ACCEPTED:
_______________________________
Daniel Mark Levine
Date: __________________________
<PAGE> 1
EXHIBIT 10.27
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is entered into as of the
3rd day of July, 1998, by and between Daniel Mark Levine and Kathleen Lynn
Levine, husband and wife, doing business as All Valley Carpet, All Valley Carpet
& Upholstery Cleaning, and All Valley Restoration Service with a business
address located at 2763 West Ave. L, #170, Lancaster, California 93536
("Seller"), and Venturi Technology Enterprises, Inc., a Nevada corporation,
having its principal office at 1327 North State Street, Orem, Utah 84057
("Purchaser").
WHEREAS, Seller owns and operates a carpet and upholstery cleaning and
restoration business located in the Lancaster, California area;
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser the Seller's Assets connected with the Seller's business in
exchange for Purchaser's common stock upon the terms described in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties agree as follows:
1. Purchase and Sale of Business. Seller shall sell to Purchaser, and Purchaser
shall purchase from Seller all of Seller's interest in all the business assets,
goodwill and rights owned by Seller and used in the operation of Seller's
business ("Seller's Assets"), including (i) the right to use Seller's business
name, (ii) the assets listed in the Bill of Sale and Assignment attached as
Exhibit "A", (iii) the assets listed on the Balance Sheet described in Section
5.3, except for assets disposed of in the ordinary course of Seller's business
between the Balance Sheet Date and the Closing Date, and (iv) all patents,
licenses, trademarks, service marks, service names, trade names, copyrights, and
applications therefor. Seller shall transfer Seller's Assets free and clear of
all liabilities and liens except as provided by this Agreement.
2. Payment for Seller's Assets.
2.1 Stock for Seller's Assets. As full payment for Seller's Assets,
Purchaser shall, at the Closing, cause to be issued to Seller five thousand
(5,000) shares of Purchaser's $.001 par value common stock (the "Shares").
2.2 Restricted Stock. The Shares issued to Seller under this Agreement
have not been registered with the Securities and Exchange Commission, nor have
the Shares been qualified under the securities laws of any state. The Seller
acknowledges that the Shares are subject to the following restriction which will
be printed in the following form on the certificates representing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED
UNDER THE
<PAGE> 2
SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY INTEREST
THEREIN MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION
UNDER THE LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO SAID
SALE OR OFFER.
Seller represents the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Seller is acquiring
the Shares for its own account, for investment, and not for resale in connection
with any distribution thereof. Seller has such knowledge and experience in
business and financial matters that it is capable of evaluating the risks of
obtaining the Shares. Seller understands the speculative nature of the Shares.
Seller has adequate net worth and means to provide for its current needs and to
sustain a complete loss of its investment. Seller has no need of liquidity of
its investment. Seller understands that at present no public market exists, and
that a public market may never exist, for the Shares and that the Purchaser is
under no obligation to provide a market for the Shares.
2.3 Restriction on Resale. Except as provided below, Seller shall not,
without the prior written consent of the Purchaser, offer for sale, sell,
pledge, hypothecate or otherwise dispose of, directly or indirectly, any of the
Shares, in any manner whatsoever, whether pursuant to SEC Rule 144 or otherwise,
prior to the date that is two (2) years after the Closing Date; provided
however, that a certain number of Shares shall be released from this restriction
on the following schedule:
5% of the total initial amount of the Shares shall be released
each month during the thirteenth (13th) through sixteenth
(16th) month after the Closing Date;
8% of the total initial amount of the Shares shall be released
each month during the seventeenth (17th) through twenty-first
(21st) month after the Closing Date; and
10% of the total initial amount of the Shares shall be
released each month during the twenty-second (22nd) through
twenty-fourth (24th) month after the Closing Date.
The certificates representing the Shares shall contain, for so long as this
restriction remains in effect, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT BETWEEN THE COMPANY
AND
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<PAGE> 3
THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE THAT
THE SHARES MAY NOT BE OFFERED OR SOLD FOR A CERTAIN PERIOD OF TIME
AFTER THE DATE OF ISSUANCE.
2.4 Right of Rescission. Either party may rescind this Agreement by
personally delivering a written notice of rescission to the other party. The
rescission cannot occur earlier than sixty days after the Closing Date, and it
cannot occur later than ninety days after the Closing Date. If there is a
rescission, each party shall return as close as reasonably possible the other
party to its position prior to the Closing. Specifically, Seller shall return
the stock certificates and shall assume the liabilities assumed by Purchaser on
behalf of Seller, and Purchaser shall return Seller's Assets (or their net
value). The terms of any Non-Competition or Non-Disclosure agreements shall
continue in effect regardless of a rescission.
2.5 Consent to Dilution. Seller understands that Purchaser plans to
acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Seller understands
and consents that future issuance of stock will dilute Seller's proportionate
ownership of Purchaser.
2.6 Liabilities Undertaking. At the Closing Purchaser shall sign a
Liabilities Undertaking in the form of the attached Exhibit "B," pursuant to
which Purchaser shall assume to pay or discharge the obligations set forth
therein.
3. Closing. The Closing shall take place at the close of business on
the 3rd day of July, 1998, at Purchaser's office or at such other time and place
as the parties agree, but in no event at a date later than July 10, 1998.
4. Seller's Obligations at Closing; Further Assurances.
4.1 At the Closing, Seller shall deliver to Purchaser:
4.1.1 a cashier's or certified check payable to Purchaser in
the amount of Seller's cash on hand and in banks, less the amount
necessary for all uncleared checks to clear which are in payment of
liabilities assumed by Purchaser hereunder (and Seller agrees to keep
enough money in the bank for such checks to clear) or, at Purchaser's
option, an assignment of all of Seller's bank accounts;
4.1.2 a Bill of Sale and Assignment signed by Seller in the
form attached as Exhibit "A";
4.1.3 any other instruments of assignment and transfer
necessary to vest in Purchaser good and marketable title to Seller's
Assets;
4.1.4 all contracts and records relating to Seller's Assets;
and
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<PAGE> 4
4.1.5 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and Seller
must sign and/or deliver any documents necessary to transfer and assign to
Purchaser, and confirm Purchaser's title to Seller's Assets, and to assist
Purchaser in the exercise of all rights thereto. After the Closing, Seller shall
have access to the books and records pertaining to its operations.
4.3 Purchaser shall have the right to collect all receivables
transferred to Purchaser under this Agreement and to endorse Seller's name on
checks received for such receivables. Seller shall transfer to Purchaser any
cash or other property Seller receives for such receivables.
4.4 Seller shall pay any income taxes payable as a result of this
transaction, and shall indemnify Purchaser from any income tax liability that
may result from this transaction.
4.5 The parties agree to allocate the purchase price among the Seller's
Assets as set forth in Schedule 4.5.
5. Representations and Warranties by Seller. Seller represents and
warrants to Purchaser as follows:
5.1 Organization, Standing and Qualification. Seller is an individual
doing business as a sole proprietorship under the business names "All Valley
Carpet," "All Valley Carpet & Upholstery Cleaning," and "All Valley Restoration
Service." Seller is not a corporation, limited liability company or a
partnership. Seller is authorized to carry on its business as now conducted and
to own and operate its properties in the places where such properties are now
located; and Seller is authorized and licensed to do business in the states
where such is required.
5.2 Execution and Performance of Agreement; Authority. The performance
of this Agreement by Seller will not result in a default or breach of any other
agreement to which Seller is a party. Seller has the authority to enter into
this Agreement.
5.3 Financial Statements. The copies of the following financial
statements given to Purchaser and prepared by Seller (called the "Financial
Statements") are complete and correct, have been prepared from the records of
Seller in accordance with generally accepted accounting principles and fairly
present the financial condition of Seller as of their dates and the results of
its operations for the periods covered thereby:
5.3.1 an unaudited balance sheet of Seller (the "Balance
Sheet") as of July 3, 1998, (the "Balance Sheet Date") and Seller's
unaudited income or cash flow statement for the period ended July 3,
1998.
Such statements of earnings do not contain any items of special income or any
other income not earned in the ordinary course of business except as specified
therein, and such interim
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<PAGE> 5
financial statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
5.4 Absence of Undisclosed Liabilities. Except as reflected on the
Balance Sheet, as of the Balance Sheet Date Seller had no debts or obligations
of any nature whatsoever, including any tax liabilities incurred in respect of
Seller's income, or its period prior to the close of business on the Balance
Sheet Date or any other debts or obligations relating to any act, omission or
other condition which occurred or existed on or before the Balance Sheet Date.
5.5 Taxes. All taxes and assessments imposed by any taxing authority,
whether federal, state, local, foreign or otherwise which are due or payable by
Seller, and all interest and penalties thereon, have been paid in full. All tax
returns required to be filed have been accurately prepared and filed and all
deposits required to be made by Seller with respect to employees' withholding
taxes have been made.
5.6 Absence of Changes or Events. Except as may be set forth in
Schedule 5.6, since the Balance Sheet Date, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.
5.7 Litigation. Except as set forth in Schedule 5.7 there is no claim,
order, investigation or other proceeding, against Seller, its employees, its
properties, or business or the transactions contemplated by this Agreement, and
Seller knows of no basis for the same.
5.8 Compliance With Laws and Other Instruments. Except as set forth in
Schedule 5.8, Seller has complied with all laws applicable to its business. The
ownership and use of Seller's Assets as well as the conduct of its business will
not conflict with the rights of any other person or entity, and will not cause a
default under any agreement to which Seller is a party. Seller is not aware of
any proposed laws, condemnations or other proceedings which would affect its
business or Seller's Assets.
5.9 Title to Properties. Seller has good title to Seller's Assets. None
of Seller's Assets are subject to any lien, lease, license, or adverse claim
except (i) as expressly set forth in the Balance Sheet as securing specific
liabilities or as otherwise expressly permitted by the terms of this Agreement,
or (ii) insubstantial imperfections of title which have arisen in the ordinary
course of business. Seller's Assets are in good operating condition and repair,
are suitable for the purposes used, and are adequate for all current operations
of Seller.
5.10 Environmental Compliance. Except as may be set forth in Schedule
5.10: (a) Seller's business is being operated in compliance with all
environmental laws and with all terms of required permits and licenses, (b)
Seller is not aware of any circumstances that may interfere with its compliance
with environmental laws or which may give rise to any liability, or which would
otherwise form the basis of any claim or investigation, and that is based on
Seller's manufacture, storage, disposal, transport, or handling, or the release
into the environment, of any hazardous substance, (c) there is no claim,
investigation, or proceeding
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<PAGE> 6
pending or threatened against Seller, in connection with the Seller's Assets or
its business relating to environmental laws, and (d) Seller currently maintains
all material government permits, licenses and agreements required to operate
Seller's Assets and business, and has complied with all requirements relating
thereto.
5.11 Schedules. Schedule 5.11 contains a complete list and description
of:
5.11.1 All real property in which Seller has any ownership or
other interest and which is used in connection with the operation of
its business.
5.11.2 As of a date no earlier than May 31, 1998, all of
Seller's receivables with detailed information on each receivable which
has been outstanding more than 30 days.
5.11.3 All equipment, motor vehicles, and other personal
property (other than inventory and supplies), owned or leased by Seller
setting forth a summary description of all leases, claims, and
conditions relating thereto.
5.11.4 All patents, trademarks, service marks, service names,
trade names, and copyrights together with any registrations,
applications and licenses related thereto, owned by Seller or used in
the operation of Seller's business.
5.11.5 All insurance policies insuring Seller or its assets,
specifying the name of the insurer, the risk insured against, the
limits of coverage, the deductible amount, the premium rate and the
date through which coverage will continue by virtue of premiums already
paid.
5.11.6 All contracts or agreements relating to the Assets to
which Seller is a party.
5.11.7 All loan agreements, conditional sale agreements,
security agreements, guaranties, and leases to which Seller is a party.
5.11.8 All employment and consulting agreements, compensation
plans, pension plans or retirement plans, group life, health and
accident insurance and other employee benefit plans, including holiday,
vacation, Christmas and other bonus practices, to which Seller is a
party.
5.11.9 The name of all banks where Seller has accounts or safe
deposit boxes and the names of all persons authorized to sign on the
accounts or have access to the boxes; and the names of all persons
holding tax or other powers of attorney from Seller and a summary of
the terms thereof.
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<PAGE> 7
All of the agreements, leases and licenses required to be listed on Schedule
5.11 (other than those which have been fully performed) are valid and binding,
and except as otherwise specified in Schedule 5.11, assignable to Purchaser
without the consent of any other party so that, after assignment to Purchaser,
Purchaser will be entitled to the full benefits thereof. Except as disclosed in
Schedule 5.11, no payment required to be made under any such agreement, lease or
license has been prepaid more than 30 days prior its due date, and there is not
any default, or event which would constitute a default, and none of such
agreements, leases or licenses is unduly burdensome or adverse to Seller's
Assets or business or likely to result in any material loss or liability. None
of Seller's existing or completed contracts is subject to renegotiation with any
government body.
5.12 No Guaranties. No obligation of Seller is guaranteed by any other
person or entity, nor has Seller guaranteed any obligation of any other person
or entity.
5.13 Receivables. All Seller's receivables have arisen only from
transactions in the ordinary course of business and shall be fully collected
within 90 days after each receivable arose, without offset or resort to
litigation, except for an allowance for doubtful accounts computed as a
percentage of sales consistent with prior practices as reflected on the most
recent annual Financial Statement.
5.14 Records. The accounting books of Seller are complete and correct,
and no transactions which are required to be recorded therein have been omitted.
5.15 Absence of Certain Business Practices. Neither Seller nor any
employee or agent of Seller has within the past five years agreed to give any
gift to any customer, supplier, government employee or other person who may be
in a position to help or hinder the business of Seller which (i) might subject
Seller to liability in any proceeding, (ii) if not given in the past, might have
had an adverse effect on the Seller's Assets or business as reflected in the
Financial Statements, or (iii) if not continued in the future, might adversely
affect Seller's Assets or business, or which might subject Seller to liability
in any proceeding.
5.16 Disclosure. All of Seller's representations made in this Agreement
and its related documents are true and contain no untrue statements and do not
omit important facts. Seller has disclosed to Purchaser in writing all the
adverse facts concerning the Seller's Assets and its business. The effectiveness
of the representations are not altered or waived by the fact that Purchaser
might have known that any of the representations are inaccurate.
5.17 No Conflict. Performance of this Agreement by Seller will not
conflict with any regulations or agreements to which Seller is a party. No
authorization or filing, which has not already been completed, is necessary for
Seller to perform this Agreement.
6. Representations and Warranties by Purchaser. Purchaser represents
and warrants to Seller as follows:
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<PAGE> 8
6.1 Organization. Purchaser is a corporation organized and in good
standing under the laws of the State of Nevada and has full authority to enter
into this Agreement and to carry on its business and to own and operate its
properties.
6.2 Authorization and Approval of Agreement. All actions required to be
taken by Purchaser relating to the singing of this Agreement shall have been
taken at or prior to the Closing.
6.3 Execution and Performance of Agreement. The performance of this
Agreement by Purchaser will not result in a default of any Agreement to which
Purchaser is a party. Purchaser has the authority to enter into this Agreement.
6.4 Litigation. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. Conduct of Business Prior to Closing.
7.1 Prior to the Closing, Seller shall conduct its business only in a
manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of Seller intact, (ii) to keep available the services
of Seller's present employees, agents and independent contractors, (iii) to
preserve the goodwill of Seller's suppliers, customers, landlords and others
having business relations with it, and (iv) to cooperate with Purchaser and
assist in obtaining the consent of any party to any lease or contract with
Seller where the consent of such party may be required by reason of this
Agreement.
7.2 If there is a change in any information contained in this Agreement
or its related documents prior to closing, Seller shall give Purchaser prompt
written notice.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) canceling agreements to which Seller is a party,
including purchase orders and commitments for capital expenditures or
improvements, (ii) discontinuing particular items or operations and (iii)
purchasing, pricing or selling policy (including selling merchandise at
discounts); provided, however, that nothing contained in this Section shall
require Seller to take action that is likely to result in a penalty or claim for
damages against Seller, or in losses to Seller, or to interfere with the conduct
of Seller's business consistent with prior practice, or to result in a breach by
Seller of any of its representations contained in this Agreement (unless the
breach is waived by Purchaser).
8. Access to Information and Documents. Upon Purchaser's request,
Seller shall give Purchaser access to Seller's personnel and all its properties,
documents and records and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same prior to the
Closing. The information gathered by Purchaser under this
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<PAGE> 9
Section shall not affect Purchaser's right to rely on the representations made
in this Agreement.
9. Employment Matters.
9.1 Purchaser intends to provide employment to as many of Seller's
current employees as possible. Schedule 9.1 is a list of all Seller's employees
as of the date of this Agreement, including the compensation for each employee.
Prior to the Closing Date, Purchaser shall provide Seller a list of employees
whom Purchaser does not intend to employ after the Closing Date. All remaining
employees shall become the employees of Purchaser on the Closing Date.
9.2 Within a reasonable period following the Closing Date Purchaser
shall provide training and support to Seller's employees to enable them to use
and sell Purchaser's products and services.
10. Bulk Sales Compliance. Purchaser waives Seller's compliance with
the Bulk Sales Law of any state. Seller agrees to pay all claims of creditors
which could be asserted against Purchaser because of such noncompliance unless
such claims are assumed by Purchaser under this Agreement. Seller indemnifies
Purchaser against any liability or expense, including attorneys' fees, incurred
by Purchaser by reason of the failure of Seller to pay such claims.
11. Non-Competition Agreement. Seller shall sign at or prior to the
Closing a Non- Competition and Continuity of Business Dealings Undertaking in
the form of Exhibit "C."
12. Conditions to Purchaser's Obligations. All obligations of Purchaser
under this Agreement are subject to, at Purchaser's option, each of the
following conditions at or prior to the Closing, and Seller shall use its best
efforts to cause each condition to be fulfilled:
13.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
13.2 All duties required by this Agreement to be performed by Seller at
or before the Closing shall be performed.
13.3 Since the date of this Agreement there shall be no material
adverse change in the condition of Seller's Assets or its business.
13.4 All documents required to be delivered to Purchaser at or prior to
the Closing shall be delivered.
13.5 Seller shall obtain written consents to the transfer or assignment
to Purchaser of all agreements of Seller where the consent of any other party
may be required.
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<PAGE> 10
14. Conditions Precedent to Seller's Obligations. All obligations of
Seller at the Closing are subject to, at Seller's option, each of the following
conditions at or prior to the Closing, and Purchaser shall use its best efforts
to cause each condition to be fulfilled:
14.1 All representations of Purchaser contained in this Agreement or
the related documents shall be correct when made and as of the Closing.
14.2 All duties required by this Agreement to be performed by Purchaser
at or before the Closing shall be performed.
13. Indemnification.
15.1 Seller indemnifies and agrees to hold Purchaser harmless from:
15.1.1 any loss suffered by Purchaser because a representation
was not true, a warranty was breached or a duty was not performed by
Seller contained in this Agreement or a related document;
15.1.2 any loss suffered by Purchaser in connection with any
of Seller's liabilities which are not assumed by Purchaser under the
Liabilities Undertaking;
15.1.3 any liabilities or debts of Seller, which exist as of
the Balance Sheet Date or which arise after that date but which are
based upon any transaction, state of facts or other condition which
occurred on or before the Balance Sheet Date, except to the extent
reflected on the Balance Sheet;
15.1.4 any liabilities or debts of Seller, which exist as of
the Closing Date or which arise after that date but which are based
upon any transaction, state of facts or other condition which occurred
on or before the Closing Date, except to the extent (i) reflected on
the Balance Sheet or incurred after the Balance Sheet Date in
connection with a purchase in the ordinary course of Seller's business
and in conformity with the representations contained in this Agreement,
and (ii) assumed by Purchaser under the terms of the Liabilities
Undertaking; and
15.1.5 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
15.2 Purchaser hereby agrees to indemnify and hold Seller harmless
from:
-10-
<PAGE> 11
15.2.1 any loss suffered by Seller because a representation
was not true, a warranty was breached or a duty was not performed by
Purchaser contained in this Agreement or a related document;
15.2.2 any liabilities or debts of Seller assumed by Purchaser
under this Agreement; and
15.2.3 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
16. Nature and Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall remain
effective after the Closing.
17. Notices. Any notices described under this Agreement shall be in
writing and shall be deemed given when personally delivered or mailed by first
class registered mail, return receipt requested, addressed to the parties at the
addresses set forth above.
18. Arbitration.
18.1 Any action, dispute, controversy or claim between or
among the Parties, whether sounding in contract, tort, or otherwise ("Dispute")
shall, at the request of any Party, be resolved by arbitration as set forth
below, and shall include any Dispute arising out of or relating to this
Agreement or any agreements or instruments relating to this Agreement or
delivered in connection with this Agreement. Any such Dispute shall be
determined by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The arbitration proceedings shall be
conducted in Salt Lake City, Utah. The arbitrator(s) shall have the
qualifications set forth in Section 18.2. All statutes of limitation which would
otherwise be applicable in a judicial action brought by a Party shall apply to
any arbitration proceeding under this Agreement.
11.2 The arbitrator(s) shall be selected in accordance with
the rules of the American Arbitration Association from panels maintained by the
Association. A single arbitrator shall be knowledgeable in the subject matter of
the arbitration proceeding. If more than one arbitrator is selected, at least
one of the arbitrators must be knowledgeable in the subject matter of the
Dispute and at least one of whom must be a practicing attorney. If more than one
arbitrator is selected, the controversy shall be decided by a majority vote of
the arbitrators. The arbitrator(s) shall award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrators' fees, and court
costs). The arbitrator(s) also may grant provisional or ancillary remedies such
as, for example, injunctive relief, attachment, or the appointment of a
receiver, either during the pendency of the arbitration proceeding or as part of
the arbitration award.
-11-
<PAGE> 12
18.3 Notwithstanding the applicability of other law to any
agreements or instruments between or among the Parties, the Federal Arbitration
Act, 9 U.S.C. Sec. 1 et seq. Shall apply to the construction and interpretation
of this Agreement.
18.4 The Parties acknowledge that they have read and
understand the following disclosures:
ARBITRATION CAN BE FINAL AND BINDING ON THE PARTIES.
THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED
AND DIFFERENT FROM COURT PROCEEDINGS.
ARBITRATORS' AWARDS ARE NOT REQUIRED TO INCLUDE
FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S
RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY
ARBITRATORS IS STRICTLY LIMITED.
19. Legal and Other Costs. In the event that any party defaults in its
obligations under this Agreement and, as a result thereof, another party seeks
to legally enforce its rights hereunder against the defaulting party, then, in
addition to all damages and other remedies to which the non-defaulting party is
entitled by reason of such default, the defaulting party shall be liable for and
shall promptly pay to the non-defaulting party an amount equal to all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the
non-defaulting party in connection with such enforcement.
20. Miscellaneous.
20.1 This writing contains the entire agreement of the parties
concerning the subject matter hereof and it may not be amended or terminated
except by a written agreement signed by all the parties.
20.2 No waiver of any default is valid unless in writing and signed by
the waiving party, and no such waiver shall be deemed a waiver of any subsequent
default.
20.3 This Agreement shall be binding upon and inure to the benefit of
each corporate party, its successors and assigns, and each individual party
hereto and his/her heirs, personal representatives, successors and assigns.
20.4 The paragraph headings are for the purposes of convenience only
and are not intended to define or limit the contents of the paragraphs.
-12-
<PAGE> 13
20.5 Each party shall cooperate and take such further action as may be
reasonably requested by any other party to carry out the provisions and purposes
of this Agreement.
20.6 This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
20.7 This Agreement and any amendments shall be governed by and
construed in accordance with law of the State of Utah.
20.9 Any information revealed pursuant to this Agreement or previously
in the course of negotiations shall be held in confidence and solely for the
purpose of consummating this Agreement in allowing the parties to exercise
prudent care. If this Agreement is not consummated, no further use shall be made
of such information (except to the extent such information was already known
prior to this Agreement) and the parties may be held accountable for any
unauthorized use. If this Agreement is not consummated, the parties shall return
all documents received from any party in connection with this Agreement. If this
Agreement is consummated, neither party shall disclose any information
concerning the other party's business or the terms of this Agreement except (i)
as approved by the other party, (ii) as necessary for the conduct of the
Purchaser's or Seller's business, (iii) as required by law, or (iv) as is
ascertainable from public information.
20.10 Each provision of this Agreement shall be interpreted in such a
way as to be valid under all laws, but in case any of the provisions shall be
held to be illegal or unenforceable, such illegality or unenforceability shall
not affect any other provision and this Agreement shall be interpreted as if the
invalid provision was not included unless the absence of such provision would
make completing the transactions contemplated hereby unreasonable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first above written.
SELLER:
0
/s/ Daniel Mark Levine
----------------------
Daniel Mark Levine, doing business as All Valley
Carpet, All Valley Carpet & Upholstery Cleaning,
and All Valley Restoration Service
/s/ K.L. Levine
---------------
Kathleen Lynn Levine, his wife
-13-
<PAGE> 14
PURCHASER:
VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation
By:/s/ John Hopkins
-----------------------------------------------
Its:
-14-
<PAGE> 15
EXHIBIT "A"
Bill of Sale and Assignment
<PAGE> 16
EXHIBIT "B"
Liabilities Undertaking
<PAGE> 17
EXHIBIT "C"
Non-Competition and Continuity of Business Dealings Undertaking
<PAGE> 18
Schedule 4.5
Allocation of Purchase Price
<PAGE> 19
Schedule 5.6
Material Changes or Events
<PAGE> 20
Schedule 5.7
Litigation
<PAGE> 21
Schedule 5.8
Compliance With Laws and Other Instruments
<PAGE> 22
Schedule 5.10
Environmental Compliance
<PAGE> 23
Schedule 5.11
Schedules of Assets, Contracts, etc.
<PAGE> 24
Schedule 9.1
Seller's Employees
<PAGE> 1
EXHIBIT 10.28
BILL OF SALE AND ASSIGNMENT
Daniel Mark Levine, doing business as a sole proprietorship under the
names All Valley Carpet, All valley Carpet & Upholstery Cleaning, and All Valley
Restoration Service, and his wife Kathleen Lynn Levine (hereinafter collectively
called "Assignor"), for One Dollar ($1.00) and other valuable consideration to
it in hand paid, receipt of which is hereby acknowledged, by these presents does
sell, assign, transfer and convey unto Venturi Technology Enterprises, Inc., a
Nevada corporation (hereinafter called "Assignee"), its successors and assigns,
the following described property, leases, licenses and intangible property:
All tangible and intangible property, leases and licenses of
every kind and description and wherever situated owned by Assignor or
to which Assignor has any right, title or interest on the date hereof,
excepting only those properties of Assignor listed on Schedule "A"
annexed hereto, and including, without limitation, all of Seller's
Assets as defined in a certain Agreement of Purchase and Sale of
Assets, dated as of July 3, 1998 between Assignor as Seller and
Assignee as Purchaser (the "Agreement"), which includes, without
limitation, the following:
(i) All cash on hand and in bank accounts, notes and loans
receivable from customers, employees and others, marketable securities
and investments, merchandise and all other inventories, packaging and
shipping materials and other supplies and supply inventories, prepaid
insurance, prepaid interest and other prepaid items and deposits, cash
surrender values of all life insurance policies, contracts, choses in
action and causes of action, claims and rights of recovery or setoff of
every kind or character arising out of transactions or events occurring
on or prior to the date hereof irrespective of the date on which any
such cause of action, claim or right may arise or accrue;
(ii) All fixed assets including, without limitation,
leaseholds and leasehold improvements, fixtures, machinery, tools,
equipment, cars and trucks;
(iii) All inventions, patents, transferable licenses,
transferable permits and transferable franchises, trademarks, trade
names, service marks, service names, copyrights, know-how, stationery
and other imprinted material and office supplies, the right to receive
mail and other communications and shipment of merchandise addressed to
Assignor, its goodwill as a going concern, and the Assignor's entire
right to use the name "Complete Carpet Service" or any similar name;
(iv) All Books and records of Assignor;
(v) All contracts, agreements and understandings to which
Assignor is a party or by which Assignor may have any rights or
obligations; and
(vi) All rights to use vendors, suppliers, dealers, brokers
and others, and all rights to deal with and sell to customers, to use
premises used by Assignor, and to rename, sell, buy, lease or assemble
all assets of Assignor.
Assignor hereby authorizes and grants its power of attorney to Assignee
and appoints Assignee and the officers thereof as Assignor's attorney-in-fact to
take any appropriate action in connection with any of said rights, claims,
causes of action and property, in the name of Assignor or in its own or any
other name
<PAGE> 2
but at its own expense, it being understood that this authorization and power of
attorney are coupled with an interest and irrevocable.
Assignee hereby assumes and agrees to keep, perform and fulfill all of
Assignor's obligations arising after the date hereof with respect to any of the
leases, licenses and intangible property transferred and assigned hereunder.
TO HAVE AND TO HOLD said rights, claims, causes of action, property,
assets, business and goodwill, as a going concern, unto the said Assignee, its
successors and assigns, to and for its use forever.
AND, Assignor does hereby warrant, covenant and agree that it:
(a) has good and marketable title to the properties and assets
hereby sold, assigned, transferred, conveyed and delivered, subject to
such liens and other encumbrances as are disclosed in the Agreement or
any schedules or exhibits thereto; and
(b) will warrant and defend the sale of, and title to, said
properties and assets against all and every person or persons
whomsoever claiming or to claim against any or all of the same.
IN WITNESS WHEREOF, Assignor has caused this instrument to be duly
executed effective this 3rd day of July, 1998.
ASSIGNOR:
------------------------------------------------------
Daniel Mark Levine, doing business under the names All
Valley Carpet, All Valley Carpet & Upholstery Cleaning,
and All Valley Restoration Services
------------------------------------------------------
Kathleen Lynn Levine, his wife
ASSIGNEE:
VENTURI TECHNOLOGY ENTERPRISES, INC., a
Nevada corporation
By:
----------------------------------------------------
Its:
-2-
<PAGE> 3
SCHEDULE "A"
(To Bill of Sale and Assignment)
Excluded Property and Assets
<PAGE> 1
EXHIBIT 10.29
LIABILITIES UNDERTAKING
THIS LIABILITIES UNDERTAKING dated effective as of July 3, 1998, by
VENTURI TECHNOLOGY ENTERPRISES, INC., a Nevada corporation (hereinafter called
the "Purchaser"), and Daniel Mark Levine, doing business as a sole
proprietorship under the names All Valley Carpet, All Valley Carpet & Upholstery
Cleaning, and All Valley Restoration Service, with a business address of 2763
West Ave. L, #170, Lancaster, California 93536 (hereinafter called the
"Seller").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement of Purchase and Sale of Assets dated
effective July 3, 1998, among Purchaser and Seller (the "Agreement"), Seller has
concurrently herewith sold, assigned, transferred, conveyed and delivered to
Purchaser substantially all of the business, assets, properties, goodwill and
rights of Seller as a going concern (the "Seller's Assets"); and
WHEREAS, in partial consideration therefor, the Agreement requires
Purchaser to execute and deliver to Seller this Undertaking;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which by Purchaser is hereby
acknowledged, Purchaser hereby agrees as follows:
1. Purchaser hereby undertakes, assumes and agrees, subject to the limitations
contained herein, to perform, pay or discharge the following:
(a) only those unpaid debts and liabilities of Seller existing
at the Closing that are specifically set forth on Schedule "A" attached
hereto;
(b) only those unperformed and unfulfilled obligations which
are required to be performed and fulfilled by Seller under the terms of
executory written contracts, agreements, leases, licenses, commitments
and undertakings that are listed in Schedule "B" attached hereto.
2. Notwithstanding anything to the contrary contained above, the debts,
liabilities and obligations assumed by Purchaser under Paragraph 1 hereof shall
not include any:
(a) legal, accounting, brokerage, finder's fee, taxes or other
expenses incurred by Seller in connection with the Agreement or the
consummation of the transactions contemplated; or
(b) federal, state or local income, franchise, excise, sales,
use, property, payroll or similar taxes imposed on Seller except to the
extent that (i) such taxes constitute debts or liabilities of Seller
which would be assumed by Purchaser under the Provisions of paragraph
1(a) above, (ii) Purchaser gets the benefits of all deposits,
<PAGE> 2
escrow accounts or other payments made or collected by such Seller on
account of or with respect to such tax liabilities; and (iii) the
Seller complies with each of the following conditions:
(A) The Seller shall afford Purchaser the right, at
its option, to assume the entire control of the preparation
and filing of all tax returns with respect thereto, and the
Seller shall keep Purchaser fully advised as to any and all
investigations, audits or other proceedings or communications
by any taxing agent or authority which may affect the amount
of the tax liabilities being assumed hereunder; and
(B) The Seller shall afford Purchaser the right, at
its option, to assume the entire control of any such audit or
other proceeding insofar as it may relate to the liabilities
of the Seller assumed hereunder, including the defense,
compromise or settlement thereof, and in connection therewith
the Seller shall cooperate fully and make available to
Purchaser all information under its control relating thereto
which Purchaser may reasonably request and shall execute and
deliver to Purchaser such powers-of-attorney or other
documents which Purchaser may reasonably deem necessary or
desirable to effectuate the foregoing.
(c) liabilities or obligations of Seller resulting or arising
from claims for personal injury or property damage or out of any breach
of any nonperformance by Seller of any contract, commitment or
obligation imposed by law or otherwise, except to the extent covered by
insurance proceeds payable to or on behalf of Purchaser; or
(d) debts, liabilities or obligations arising under any
contract which has not been assigned to Purchaser so that Purchaser
will enjoy the full benefits thereunder or which is listed in any
Schedule to the Agreement and specifically designated thereon as "Not
Assumed"; or
(e) debts, liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
date of the Closing or which arise after the Closing but which are
based upon or arise from any act, omission, transaction, circumstance,
sale of goods or services, state of facts or other condition which
occurred or existed on or before the date of the Closing, whether or
not then known, due or payable, except to the extent specifically set
forth on Schedule "A" or Schedule "B" attached hereto in connection
with the purchase of goods or services in the ordinary course of
Seller's business and in conformity with the representations,
warranties and covenants contained in the Agreement; or
(f) accounts payable incurred by Seller that are more than
sixty (60) days past due as of the date of the Closing.
-2-
<PAGE> 3
3. Nothing contained herein shall require Purchaser to pay or discharge
any debts or obligations expressly assumed hereby so long as Purchaser shall in
good faith contest or cause to be contested the amount or validity thereof.
4. Other than as specifically stated above or in the Agreement,
Purchaser assumes no debt, liability or obligation of Seller by this
Undertaking, and it is expressly understood and agreed that all debts,
liabilities and obligations not assumed hereunder by Purchaser shall remain the
sole obligation of Seller, successors and assigns, and no person, firm or
corporation other than Seller shall have any rights under this Undertaking or
the provisions herein.
VENTURI TECHNOLOGY ENTERPRISES,
INC., a Nevada corporation
By:_______________________________________________
Its:
-3-
<PAGE> 4
SCHEDULE "A"
Debts and Liabilities Assumed by Purchaser
<PAGE> 5
SCHEDULE "B"
Unperformed and Unfulfilled Obligations Assumed by Purchaser
<PAGE> 1
Exhibit 10.30
NON-COMPETITION, CONFIDENTIALITY AND
CONTINUITY OF BUSINESS DEALINGS
UNDERTAKING
This NON-COMPETITION AND CONTINUITY OF BUSINESS DEALINGS UNDERTAKING
dated effective July 3, 1998 by Daniel Mark Levine, whose address is 2763 West
Ave. L, #170, Lancaster, California 93536 (hereinafter called the "Seller"), in
favor of VENTURI TECHNOLOGY ENTERPRISES, INC., a Nevada corporation with its
principal place of business at 1327 North State Street, Orem, Utah 84057
(hereinafter called the "Company").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Agreement of Purchase and Sale
of Assets, dated effective as of July 3, 1998 (the "Agreement"), with Seller
pursuant to which the Company is to purchase and the Seller is to sell, all of
Seller's business, assets, properties, goodwill and rights (the "Seller's
Assets"); and
WHEREAS, the Agreement requires that Seller execute and deliver this
Undertaking pursuant to which the rights of Sellers compete against the Company
or disclose the Company's confidential information is restricted so as to
protect the Company's proprietary rights and interests.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt of which by the undersigned is hereby
acknowledged, and in order to induce the Company to purchase the Seller's Assets
pursuant to the terms of the Agreement, the undersigned hereby undertakes and
agrees as follows:
1. Non-Competition. The undersigned agrees that he will not,
for a period of one (1) year from the date of the closing of the
transactions contemplated by the Agreement (hereinafter called the
"Closing"), or, if the undersigned shall be or become an employee of
the Company, for a period of one (1) year after the termination of
undersigned's employment, whichever is later (the "Limited Period"),
directly, or indirectly, constructively or beneficially, anywhere in
the United States or Canada or within the geographical area or
territory where the business of Seller is presently being conducted or
may from time to time be conducted by the Company during the Limited
Period, own, manage, operate or control, or participate in the
ownership, management, operation or control of, or be connected with or
have any interest in, as a stockholder, director, officer, employee,
agent, consultant, partner, officer, employee, agent, consultant,
partner or otherwise, (a) any business which manufactures, produces,
sell or distributes carpet cleaning solutions, solvents,
<PAGE> 2
chemicals, formulas, tools or equipment or any other products similar
to those that have been manufactured, produced, sold or distributed by
the Company or which are competitive therewith or (b) any other
business which is competitive with any business conducted by the
Company or any of its subsidiaries during the Limited Period; provided,
however, that nothing contained herein shall prohibit the undersigned
from owning (beneficially or record title) less than 5% of any class of
securities listed on a national securities exchange or traded publicly
in the over-the-counter market; and provided further, that nothing
contained herein shall be deemed to prohibit the undersigned from
engaging in any business that is substantially the same in terms of
techniques, customers and geographic area as the business in which the
undersigned was engaged immediately prior to the Closing. If any
provision of this paragraph is held to be unenforceable because of the
scope, duration or area of its applicability, the court making such
determination shall have the power to modify such scope, duration or
area or all of them, and such provision shall then be applicable in
such modified form.
2. Confidentiality. Seller shall not disclose to any third
party or use in any way for his own or another's benefit any of the
Company's Confidential Information as defined herein. Seller shall not
copy or create documents containing Company's Confidential Information
without the prior written approval of Company. All such copies and
documents shall be returned to Company or destroyed upon Company's
request. For purposes of this Agreement "Confidential Information"
includes, but is not limited to, intellectual property, customer names
or lists, the names or any lists of any employees, consultants,
contractors or advisors, any strategies, plans, forecasts, systems,
processes, procedures, techniques, methods, technologies, software,
hardware, ideas, products, specifications, data, formulas, patterns,
compilations, programs, devices, methods, contracts, records, manuals,
policies, financial information and any other business information;
provided, however, that the foregoing shall not be considered to be
confidential if and to the extent that it is publicly known or
nonproprietary generic knowledge. Seller acknowledges that Company owns
such Confidential Information and that Seller is not acquiring any
right, title or interest in or to such Confidential Information.
3. Continuity of Business. The undersigned will use his best
efforts to preserve the business of Seller, to keep available to the
Company the services of Seller's present employees and agents and to
preserve for the Company Seller's present business relations with its
suppliers, distributors, customers and others, and the undersigned
shall not, either before or after the Closing, commit any act, or in
any way assist others to commit any act, which will injure the Company
or the business heretofore conducted by Seller.
-2-
<PAGE> 1
Exhibit 10.31
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is entered into as of the
30 day of June, 1998, by and between Video Aire, ("Seller"), and Venturi
Technology Enterprises, Inc., a Nevada corporation, having its principal office
at 1327 North State Street, Orem, Utah 84057 ("Purchaser").
WHEREAS, Seller owns and operates a carpet cleaning business located in
the Ft. Worth, TX area;
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser the Seller's Assets connected with the Seller's business in
exchange for Purchaser's common stock upon the terms described in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties agree as follows:
1. Purchase and Sale of Business. Seller shall sell to Purchaser, and
Purchaser shall purchase from Seller all of Seller's interest in all the
business assets, goodwill and rights owned by Seller and used in the operation
of Seller's business ("Seller's Assets"), including (i) the right to use
Seller's business name, (ii) the assets listed in the Bill of Sale and
Assignment attached as Exhibit "A", (iii) the assets listed on the Balance Sheet
described in Section 5.3, except for assets disposed of in the ordinary course
of Seller's business between the Balance Sheet Date and the Closing Date, and
(iv) all patents, licenses, trademarks, service marks, service names, trade
names, copyrights, and applications therefor. Seller shall transfer Seller's
Assets free and clear of all liabilities and liens except as provided by this
Agreement.
2. Payment for Seller's Assets.
2.1 Stock for Seller's Assets. As full payment for Seller's
Assets, Purchaser shall, at the Closing, cause to be issued to Seller _______
(96,000) shares of Purchaser's $.001 par value common stock (the "Shares").
2.2 Restricted Stock. The Shares issued to Seller under this
Agreement have not been registered with the Securities and Exchange Commission,
nor have the Shares been qualified under the securities laws of any state. The
Seller acknowledges that the Shares are subject to the following restriction
which will be printed in the following form on the certificates representing the
Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR QUALIFIED UNDER THE SECURITIES
LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY
<PAGE> 2
INTEREST THEREIN MAY BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER THE ACT AND QUALIFICATION UNDER THE LAW OR AN OPINION
OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO SAID
SALE OR OFFER.
Seller represents the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Seller is acquiring
the Shares for its own account, for investment, and not for resale in connection
with any distribution thereof. Seller has such knowledge and experience in
business and financial matters that it is capable of evaluating the risks of
obtaining the Shares. Seller understands the speculative nature of the Shares.
Seller has adequate net worth and means to provide for its current needs and to
sustain a complete loss of its investment. Seller has no need of liquidity of
its investment. Seller understands that at present no public market exists, and
that a public market may never exist, for the Shares and that the Purchaser is
under no obligation to provide a market for the Shares.
2.3 Restriction on Resale. Except as provided below, Seller shall
not, without the prior written consent of the Purchaser, offer for sale, sell,
pledge, hypothecate or otherwise dispose of, directly or indirectly, any of the
Shares, in any manner whatsoever, whether pursuant to SEC Rule 144 or otherwise,
prior to the date that is one (1) year after the Closing Date; provided however,
that a certain number of Shares shall be released from this restriction on the
following schedule:
5% of the total initial amount of the Shares shall be
released each month during the thirteenth (13th)
through sixteenth (16th) month after the Closing
Date;
8% of the total initial amount of the Shares shall be
released each month during the seventeenth (17th)
through twenty-first (2lth) month after the Closing
Date; and
10% of the total initial amount of the Shares shall
be released each month during the twenty-second
(22nd) through twenty-fourth (24th) month after the
Closing Date.
The certificates representing the Shares shall contain, for so long as this
restriction remains in effect, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER, INCLUDING AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER
OF THE SHARES REPRESENTED BY THIS
2
<PAGE> 3
CERTIFICATE THAT THE SHARES MAY NOT BE OFFERED OR SOLD FOR A CERTAIN PERIOD OF
TIME AFTER THE DATE OF ISSUANCE.
2.4 Right of Rescission. Either party may rescind this Agreement
by personally delivering a written notice of rescission to the other party. The
rescission cannot occur earlier than sixty days after the Closing Date, and it
cannot occur later than ninety days after the Closing Date. If there is a
rescission, each party shall return as close as reasonably possible the other
party to its position prior to the Closing. Specifically, Seller shall return
the stock certificates and shall assume the liabilities assumed by Purchaser on
behalf of Seller, and Purchaser shall return Seller's Assets (or their net
value). The terms of any Non-Competition or Non-Disclosure agreements shall
continue in effect regardless of a rescission.
2.5 Consent to Dilution. Seller understands that Purchaser plans
to acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Seller understands
and consents that future issuance of stock will dilute Seller's proportionate
ownership of Purchaser.
2.6 Liabilities Undertaking. At the Closing Purchaser shall sign a
Liabilities Undertaking in the form of the attached Exhibit "B, " pursuant to
which Purchaser shall assume to pay or discharge the obligations set forth
therein.
3. Closing. The Closing shall take place at 10:00 a.m. on the
30th day of June, 1998, at Purchaser's office or at such other time and place as
the parties agree, but in no event to a date later than July 15, 1998.
4. Seller's Obligations at Closing; Further Assurances.
4.1 At the Closing, Seller shall deliver to Purchaser:
4.1.1 a cashier's or certified check payable to Purchaser in
the amount of Seller's cash on hand and in banks, less the amount
necessary for all uncleared checks to clear which are in payment of
liabilities assumed by Purchaser hereunder (and Seller agrees to keep
enough money in the bank for such checks to clear) or, at Purchaser's
option, an assignment of all of Seller's bank accounts;
4.1.2 a Bill of Sale and Assignment signed by Seller in the
form attached as Exhibit "A";
4.1.3 any other instruments of assignment and transfer
necessary to vest in Purchaser good and marketable title to Seller's
Assets;
4.1.4 all contracts and records relating to Seller's Assets;
and
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<PAGE> 4
4.1.5 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and
Seller must sign and/or deliver any documents necessary to transfer and assign
to Purchaser, and confirm Purchaser's title to Seller's Assets, and to assist
Purchaser in the exercise of all rights thereto. After the Closing, Seller shall
have access to the books and records pertaining to its operations.
4.3 Purchaser shall have the right to collect all receivables
transferred to Purchaser under this Agreement and to endorse Seller's name on
checks received for such receivables. Seller shall transfer to Purchaser any
cash or other property Seller receives for such receivables.
4.4 Seller shall pay any income taxes payable as a result of this
transaction, and shall indemnify Purchaser from any income tax liability that
may result from this transaction.
4.5 The parties agree to allocate the purchase price among the
Seller's Assets as set forth in Schedule 4.5.
5. Representations and Warranties by Seller. Seller represents
and warrants to Purchaser as follows:
5.1 Organization, Standing and Qualification. Seller is an
individual doing business as a sole proprietorship under the business name
"Video Aire". Seller is not a corporation, limited liability company or a
partnership. Seller is authorized to carry on its business as now conducted and
to own and operate its properties in the places where such properties are now
located; and Seller is authorized and licensed to do business in the states
where such is required.
5.2 Execution and Performance of Agreement; Authority. The
performance of this Agreement by Seller will not result in a default or breach
of any other agreement to which Seller is a party. Seller has the authority to
enter into this Agreement.
5.3 Financial Statements. The copies of the following financial
statements given to Purchaser and prepared by Seller (called the "Financial
Statements") are complete and correct, have been prepared from the records of
Seller in accordance with generally accepted accounting principles and fairly
present the financial condition of Seller as of their dates and the results of
its operations for the periods covered thereby:
5.3.1 an unaudited balance sheet of Seller (the "Balance
Sheet") as of 12-31 1997, (the "Balance Sheet Date") and Seller's
unaudited income or cash flow statement for the - week period ended
12-31-97.
Such statements of earnings do not contain any items of special income or any
other income not earned in the ordinary course of business except as specified
therein, and such interim financial
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<PAGE> 5
statements include all adjustments, which consist only of normal recurring
accruals, necessary for such fair presentation.
5.4 Absence of Undisclosed liabilities. Except as reflected on the
Balance Sheet, as of the Balance Sheet Date Seller had no debts or obligations
of any nature whatsoever, including any tax liabilities incurred in respect of
Seller's income, or its period prior to the close of business on the Balance
Sheet Date or any other debts or obligations relating to any act, omission or
other condition which occurred or existed on or before the Balance Sheet Date.
5.5 Taxes. All taxes and assessments imposed by any taxing
authority, whether federal, state, local, foreign or otherwise which are due or
payable by Seller, and all interest and penalties thereon, have been paid in
full. All tax returns required to be filed have been accurately prepared and
filed and all deposits required to be made by Seller with respect to employees'
withholding taxes have been made.
5.6 Absence of Changes or Events. Except as may be set forth in
Schedule 5.6, since the Balance Sheet Date, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.
5.7 Litigation. Except as set forth in Schedule 5.7 there is no
claim, order, investigation or other proceeding, against Seller, its employees,
its properties, or business or the transactions contemplated by this Agreement,
and Seller knows of no basis for the same.
5.8 Compliance With Laws and Other Instruments. Except as set
forth in Schedule 5.8, Seller has complied with all laws applicable to its
business. The ownership and use of Seller's Assets as well as the conduct of its
business will not conflict with the rights of any other person or entity, and
will not cause a default under any agreement to which Seller is a party. Seller
is not aware of any proposed laws, condemnations or other proceedings which
would affect its business or Seller's Assets.
5.9 Title to Properties. Seller has good title to Seller's Assets.
None of Seller's Assets are subject to any lien, lease, license, or adverse
claim except (i) as expressly set forth in the Balance Sheet as securing
specific liabilities or as otherwise expressly permitted by the terms of this
Agreement, or (ii) insubstantial imperfections of title which have arisen in the
ordinary course of business. Seller's Assets are in good operating condition and
repair, are suitable for the purposes used, and are adequate for all current
operations of Seller.
5.10 Environmental Compliance. Except as set forth in Schedule 5.
10, Seller's business is being operated in compliance with all environmental
laws and with all terms of required permits and licenses.
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<PAGE> 6
5.11 Environmental Notices. Except as set forth in Schedule 5.1.1,
Seller is not aware of any circumstances that may interfere with its compliance
with environmental laws or which may give rise to any liability, or which would
otherwise form the basis of any claim or investigation, and that is based on
Seller's manufacture, storage, disposal, transport, or handling, or the release
into the environment, of any hazardous substance.
5.12 Environmental Claims. Except as set forth in Schedule 5.12,
there is no claim, investigation, or proceeding pending or threatened against
Seller, in connection with the Seller's Assets or its business relating to
environmental laws.
5.13 Environmental Permits. Except as set forth in Schedule 5.13,
Seller currently maintains all material government permits, licenses and
agreements required to operate Seller's Assets and business, and has complied
with all requirements relating thereto.
5.14 Schedules. Schedule 5.14 contains a complete list and
description of:
5.14.1 All real property in which Seller has any ownership or
other interest and which is used in connection with the operation of
its business.
5.14.2 As of a date no earlier than June 30, 1997, all of
Seller's receivables with detailed information on each receivable which
has been outstanding more than 30 days.
5.14.3 All equipment, motor vehicles, and other personal
property (other than inventory and supplies), owned or leased by Seller
setting forth a summary description of all leases, claims, and
conditions relating thereto.
5.14.4 All patents, trademarks, service marks, service names,
trade names, and copyrights together with any registrations,
applications and licenses related thereto, owned by Seller or used in
the operation of Seller's business.
5.14.5 All insurance policies insuring Seller or its assets,
specifying the name of the insurer, the risk insured against, the
limits of coverage, the deductible amount, the premium rate and the
date through which coverage will continue by virtue of premiums already
paid.
5.14.6 All contracts or agreements relating to the Assets to
which Seller is a party.
5.14.7 All loan agreements, conditional sale agreements,
security agreements, guaranties, and leases to which Seller is a party.
5.14.8 All employment and consulting agreements, compensation
plans, pension plans or retirement plans, group life, health and
accident insurance and other employee
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<PAGE> 7
benefit plans, including holiday, vacation, Christmas and other bonus
practices, to which Seller is a party.
5.14.9 The name of all banks where Seller has accounts or safe
deposit boxes and the names of all persons authorized to sign on the
accounts or have access to the boxes; and the names of all persons
holding tax or other powers of attorney from Seller and a summary of
the terms thereof.
All of the agreements, leases and licenses required to be listed on Schedule
5.14 (other than those which have been fully performed) are valid and binding,
and except as otherwise specified in Schedule 5.14, assignable to Purchaser
without the consent of any other party so that, after assignment to Purchaser,
Purchaser will be entitled to the full benefits thereof. Except as disclosed in
Schedule 5.14, no payment required to be made under any such agreement, lease or
license has been prepaid more than 30 days prior its due date, and there is not
any default, or event which would constitute a default, and none of such
agreements, leases or licenses is unduly burdensome or adverse to Seller's
Assets or business or likely to result in any material loss or liability. None
of Seller's existing or completed contracts is subject to renegotiation with any
government body.
5.15 No Guaranties. No obligation of Seller is guaranteed by any
other person or entity, nor has Seller guaranteed any obligation of any other
person or entity.
5.16 Receivables. All Seller's receivables have arisen only from
transactions in the ordinary course of business and shall be fully collected
within 90 days after each receivable arose, without offset or resort to
litigation, except for an allowance for doubtful accounts computed as a
percentage of sales consistent with prior practices as reflected on the most
recent annual Financial Statement.
5.17 Records. The accounting books of Seller are complete and
correct, and no transactions which are required to be recorded therein have been
omitted.
5.18 Absence of Certain Business Practices. Neither Seller nor any
employee or agent of Seller has within the past five years agreed to give any
gift to any customer, supplier, government employee or other person who may be
in a position to help or hinder, the business of Seller which (i) might subject
Seller to liability in any proceeding, (ii) if not given in the past, might have
had an adverse effect on the Seller's Assets or business as reflected in the
Financial Statements, or (iii) if not continued in the future, might adversely
affect Seller's Assets or business, or which might subject Seller to liability
in any proceeding.
5.19 Disclosure. All of Seller's representations made in this
Agreement and its related documents are true and contain no untrue statements
and do not omit important facts. Seller has disclosed to Purchaser in writing
all the adverse facts concerning the Seller's Assets and its
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<PAGE> 8
business. The effectiveness of the representations are not altered or waived by
the fact that Purchaser might have known that any of the representations are
inaccurate.
5.20 No Conflict. Performance of this Agreement by Seller will not
conflict with any regulations or agreements to which Seller is a party. No
authorization or filing, which has not already been completed, is necessary for
Seller to perform this Agreement.
6. Representations and Warranties by Purchaser. Purchaser
represents and warrants to Seller as follows:
6.1 Organization. Purchaser is a corporation organized and in good
standing under the laws of the State of Nevada and has full authority to enter
into this Agreement and to carry on its business and to own and operate its
properties.
6.2 Authorization and Approval of Agreement. All actions required
to be taken by Purchaser relating to the singing of this Agreement shall have
been taken at or prior to the Closing.
6.3 Execution and Performance of Agreement. The performance of
this Agreement by Purchaser will not result in a default of any Agreement to
which Purchaser is a party. Purchaser has the authority to enter into this
Agreement.
6.4 Litigation. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. Conduct of Business Prior to Closing.
7.1 Prior to the Closing, Seller shall conduct its business only
in a manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of Seller intact, (ii) to keep available the services
of Seller's present employees, agents and independent contractors, (iii) to
preserve the goodwill of Seller's suppliers, customers, landlords and others
having business relations with it, and (iv) to cooperate with Purchaser and
assist in obtaining the consent of any party to any lease or contract with
Seller where the consent of such party may be required by reason of this
Agreement.
7.2 If there is a change in any information contained in this
Agreement or its related documents prior to closing, Seller shall give Purchaser
prompt written notice.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) canceling agreements to which Seller is a party,
including purchase orders and commitments for capital expenditures or
improvements, (ii) discontinuing particular items or
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<PAGE> 9
operations and (iii) purchasing, pricing or selling policy (including selling
merchandise at discounts); provided, however, that nothing contained in this
Section shall require Seller to take action that is likely to result in a
penalty or claim for damages against Seller, or in losses to Seller, or to
interfere with the conduct of Seller's business consistent with prior practice,
or to result in a breach by Seller of any of its representations contained in
this Agreement (unless the breach is waived by Purchaser).
8. Access to Information and Documents. Upon Purchaser's request,
Seller shall give Purchaser access to Seller's personnel and all its properties,
documents and records and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same prior to the
Closing. The information gathered by Purchaser under this Section shall not
affect Purchaser's right to rely on the representations made in this Agreement.
9. Employment Matters.
9.1 Purchaser intends to provide employment to as many of Seller's
current employees as possible. Schedule 9.1 is a list of all Seller's employees
as of the date of this Agreement, including the compensation for each employee.
Prior to the Closing Date, Purchaser shall provide Seller a list of employees
whom Purchaser does not intend to employ after the Closing Date. All remaining
employees shall become the employees of Purchaser on the Closing Date.
9.2 Within a reasonable period following the Closing Date
Purchaser shall provide training and support to Seller's employees to enable
them to use and sell Purchaser's products and services.
10. Bulk Sales Compliance. Purchaser waives Seller's compliance
with the Bulk Sales Law of any state. Seller agrees to pay all claims of
creditors which could be asserted against Purchaser because of such
noncompliance unless such claims are assumed by Purchaser under this Agreement.
Seller indemnities Purchaser against any liability or expense, including
attorneys' fees, incurred by Purchaser by reason of the failure of Seller to pay
such claims.
11. Non-Competition Agreement. Seller shall sign at or prior to
the Closing a Non-Competition and Continuity of Business Dealings Undertaking
in the form of Exhibit "C.
12. Conditions to Purchaser's Obligations. All obligations of
Purchaser under this Agreement are subject to, at Purchaser's option, each of
the following conditions at or prior to the Closing, and Seller shall use its
best efforts to cause each condition to be fulfilled:
13.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
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<PAGE> 10
13.2 All duties required by this Agreement to be performed by
Seller at or before the Closing shall be performed.
13.3 Since the date of this Agreement there shall be no material
adverse change in the condition of Seller's Assets or its business.
13.4 All documents required to be delivered to Purchaser at or
prior to the Closing shall be delivered.
13.5 Seller shall obtain written consents to the transfer or
assignment to- Purchaser of all agreements of Seller where the consent of any
other party may be required.
14. Conditions Precedent to Seller's Obligations. All obligations
of Seller at the Closing are subject to, at Seller's option, each of the
following conditions at or prior to the Closing, and Purchaser shall use its
best efforts to cause each condition to be fulfilled:
14.1 All representations of Purchaser contained in this Agreement
or the related documents shall be correct when made and as of the Closing.
14.2 All duties required by this Agreement to be performed by
Purchaser at or before the Closing shall be performed.
13. Indemnification.
15.1 Seller indemnities and agrees to hold Purchaser harmless from:
15.1.1 any loss suffered by Purchaser because a representation
was not true, a warranty was breached or a duty was not performed by
Seller contained in this Agreement or a related document;
15.1.2 any loss suffered by Purchaser in connection with any
of Seller's liabilities which are not assumed by Purchaser under the
Liabilities Undertaking;
15.1.3 any liabilities or debts of Seller, which exist as of
the Balance Sheet Date or which arise after that date but which are
based upon any transaction, state of facts or other condition which
occurred on or before the Balance Sheet Date, except to the extent
reflected on the Balance Sheet;
15.1.4 any liabilities or debts of Seller, which exist as of
the Closing Date or which arise after that date but which are based
upon any transaction, state of facts or other condition which occurred
on or before the Closing Date, except to the extent (i) reflected on
the Balance Sheet or incurred after the Balance Sheet Date in
connection with a purchase in the ordinary course of Seller's business
and in conformity with the
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representations contained in this Agreement, and (ii) assumed by
Purchaser under the terms of the Liabilities Undertaking; and
15.1.5 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
15.2 Purchaser hereby agrees to indemnify and hold Seller harmless
from:
15.2.1 any loss suffered by Seller because a representation
was not true, a warranty was breached or a duty was not performed by
Purchaser contained in this Agreement or a related document;
15.2.2 any liabilities or debts of Seller assumed by Purchaser
under this Agreement; and
15.2.3 any claims, judgments and expenses, including legal
fees, incurred for any of the foregoing or for attempting to avoid or
oppose the same or for enforcing this indemnity.
16. Nature and Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall remain
effective after the Closing.
17. Notices. Any notices described under this Agreement shall be
in writing and shall be deemed given when personally delivered or mailed by
first class registered mail, return receipt requested, addressed to the parties
at the addresses set forth above.
18. Arbitration.
18.1 Any action, dispute, controversy or claim between or among the
Parties, whether sounding in contract, tort, or otherwise ("Dispute") shall, at
the request of any Party, be resolved by arbitration as set forth below, and
shall include any Dispute arising out of or relating to this Agreement or any
agreements or instruments relating to this Agreement or delivered in connection
with this Agreement. Any such Dispute shall be determined by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration proceedings shall be conducted in Salt Lake City,
Utah. The arbitrator(s) shall have the qualifications set forth in Section 18.2.
All statutes of limitation which would otherwise be applicable in a judicial
action brought by a Party shall apply to any arbitration proceeding under this
Agreement.
18.2 The arbitrator(s) shall be selected in accordance with the
rules of the American Arbitration Association from panels maintained by the
Association. A single arbitrator shall be knowledgeable in the subject matter of
the arbitration proceeding. If more than one arbitrator is
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<PAGE> 12
selected, at least one of the arbitrators must be knowledgeable in the subject
matter of the Dispute and at least one of whom must be a practicing attorney. If
more than one arbitrator is selected, the controversy shall be decided by a
majority vote of the arbitrators. The arbitrator(s) shall award recovery of all
costs and fees (including attorneys' fees, administrative fees, arbitrators'
fees, and court costs). The arbitrator(s) also may grant provisional or
ancillary remedies such as, for example, injunctive relief, attachment, or the
appointment of a receiver, either during the pendency of the arbitration
proceeding or as part of the arbitration award.
18.3 Notwithstanding the applicability of other law to any
agreements or instruments between or among the Parties, the Federal Arbitration
Act, 9 U.S.C. Sec. I et seq. Shall apply to the construction and interpretation
of this Agreement.
18.4 The Parties acknowledge that they have read and understand the
following disclosures:
ARBITRATION CAN BE FINAL AND BINDING ON THE PARTIES.
THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT,
INCLUDING THEIR RIGHT TO A JURY TRIAL.
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND
DIFFERENT FROM COURT PROCEEDINGS.
ARBITRATORS' AWARDS ARE NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR
TO SEEK MODIFICATION OF RULINGS BY ARBITRATORS IS STRICTLY
LIMITED.
19. Legal and Other Costs. In the event that any party defaults in
its obligations under this Agreement and, as a result thereof, another party
seeks to legally enforce its rights hereunder against the defaulting party,
then, in addition to all damages and other remedies to which the non-defaulting
party is entitled by reason of such default, the defaulting party shall be
liable for and shall promptly pay to the non-defaulting party an amount equal to
all costs and expenses (including reasonable attorneys' fees) paid or incurred
by the non-defaulting party in connection with such enforcement.
20. Miscellaneous.
20.1 This writing contains the entire agreement of the parties
concerning the subject matter hereof and it may not be amended or terminated
except by a written agreement signed by all the parties.
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20.2 No waiver of any default is valid unless in writing and signed
by the waiving party, and no such waiver shall be deemed a waiver of any
subsequent default.
20.3 This Agreement shall be binding upon and inure to the benefit
of each corporate party, its successors and assigns, and each individual party
hereto and his/her heirs, personal representatives, successors and assigns.
20.4 The paragraph headings are for the purposes of convenience
only and are not intended to define or limit the contents of the paragraphs.
20.5 Each party shall cooperate and take such further action as may
be reasonably requested by any other party to carry out the provisions and
purposes of this Agreement.
20.6 This Agreement may be executed in one or more counterparts,
all of which taken together shall be deemed one original.
20.7 This Agreement and any amendments shall be governed by and
construed in accordance with law of the State of Utah.
20.9 Any information revealed pursuant to this Agreement or
previously in the course of negotiations shall be held in confidence and solely
for the purpose of consummating this Agreement in allowing the parties to
exercise prudent care. If this Agreement is not consummated, no further use
shall be made of such information (except to the extent such information was
already known prior to this Agreement) and the parties may be held accountable
for any unauthorized use. If this Agreement is not consummated, the parties
shall return all documents received from any party in connection with this
Agreement. If this Agreement is consummated, neither party shall disclose any
information concerning the other party's business or the terms of this Agreement
except (i) as approved by the other party, (ii) as necessary for the conduct of
the Purchaser's or Seller's business, (iii) as required by law, or (iv) as is
ascertainable from public information.
20.10 Each provision of this Agreement shall be interpreted in such
a way as to be valid under all laws, but in case any of the provisions shall be
held to be illegal or unenforceable, such illegality or unenforceability shall
not affect any other provision and this Agreement shall be interpreted as if the
invalid provision was not included unless the absence of such provision would
make completing the transactions contemplated hereby unreasonable.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first above written.
SELLER: VIDEO-AIRE
/s/ [illegible signature]
-------------------------------------
PURCHASER:
VENTURI TECHNOLOGY ENTERPRISES, INC.,
a Nevada corporation
By: /s/ Gaylord Karren
---------------------------------
Its: CEO
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<PAGE> 1
EXHIBIT 10.32
VENTURI TECHNOLOGY ENTERPRISES, INC.
1327 North State Street
Orem, Utah 84057
[Date]
6-29-98
[Company]
[Address]
Re: Proposed acquisition of Assets of Dirt Free Carpet & Upholstery
[sic] Cleaning Inc.
Dear Aubrey Theode
This letter is to set forth the terms of our proposed
acquisition of Dirt Free Carpet Cleaning & Upholstry [sic] Cleaning Inc. If the
terms of this letter are acceptable, please sign a copy of this letter and
return it to us. We will then have our attorney prepare an Asset Purchase
Agreement (the "Agreement") between Venturi Technology Enterprises, Inc., a
Nevada corporation, as the buyer ("Venturi") and Dirt Free Carpet & Upholstry
[sic] Cleaning Inc. as the seller ("Seller").
Venturi hereby offers to purchase all of the tangible and
intangible assets owned by Sellers used in the business located at
3505 S. Dairy Asford, Suite 251, Houston, Tex 7708: (the "Business"), on the
following terms and conditions:
1. Purchase Price. Venturi will issue a total of 52,632 shares of
its common stock (no par value) to Seller in exchange for all
of the assets of Seller used in the Business. The shares of
stock to be issued to Seller shall be restricted stock, and
the ability of Seller to resell such stock shall be limited
both by applicable securities laws and by certain "leak-out"
provisions imposed by Venturi.
2. Representations, Warranties and Conditions. The Agreement will
contain usual and customary representations, warranties,
covenants, and other agreements (including a tax allocation
agreement), on behalf of Seller [and its stockholders] and the
Closing will be subject to usual and customary conditions,
including:
A. obtaining of necessary consents or approvals of
governmental bodies, lenders, lessors, or other third
parties;
B. absence of pending or threatened litigation regarding
the Assets, the Liabilities or the Agreement;
C. satisfactory completion of Venturi's due diligence
investigation;
D. delivery of customary legal opinions, closing
certificates and other documentation.
<PAGE> 2
3. Assumption of Liabilities. Venturi will not assume any of the
debts, liabilities or obligations of Seller except as
specifically set forth in an Assumption of Liabilities
Agreement that may be executed at the time of Closing, and
Seller shall indemnify Venturi and hold Venturi harmless with
respect to any such unassumed liabilities.
4. Employment Agreement. Venturi's obligation to close shall be
conditioned on, among other things, [name of Seller or
principal of Seller] entering into an employment agreement
with Venturi upon terms satisfactory to Venturi.
5. Noncompetition Agreement. Venturi's obligation to close shall
be conditioned on, among other things, [name of Seller or
principal of Seller] entering into a noncompetition agreement
with Buyer on terms satisfactory to the Buyer.
6. Closing Date. The closing will take place as soon as the
conditions set forth herein are satisfied and as soon as final
documents can be prepared, but in any event no later than
August, 1998.
If the offer contained in this letter is acceptable to Seller,
please sign and return to Venturi a copy of this letter. Unless signed by you
and returned to Venturi within ten (10) days from the date of this letter, the
offer set forth herein shall be automatically revoked and shall become null and
void.
Sincerely,
VENTURI TECHNOLOGY ENTERPRISES, INC.
By: /s/ John Hopkins
--------------------------
John Hopkins
President
AGREED AND ACCEPTED:
[SELLER]
By: /s/Aubrey Thoede
----------------------
Its:
--------------------
Date:
<PAGE> 1
EXHIBIT 10.33
VENTURI TECHNOLOGY ENTERPRISES, INC.
1327 North State Street
Orem, Utah 84057
July 22, 1998
Disaster Plus
Rob Blyle
573 West 1830 North, #4
Orem, UT 84057
Re: Proposed acquisition of Assets of Rob Blyle doing business as
Disaster Plus
Dear Rob:
This letter is to set forth the terms of our proposed acquisition of
Disaster Plus. If the terms of this letter are acceptable, please sign a copy of
this letter and return it to us. We will then have our attorney prepare an Asset
Purchase Agreement (the "Agreement") between Venturi Technology Enterprises,
Inc., a Nevada corporation, as the buyer ("Venturi") and Rob Blyle doing
business as Disaster Plus as the seller ("Seller").
Venturi hereby offers to purchase all of the tangible and intangible
assets owned by Sellers used in the Disaster Plus business located at 573 West
1830 North, #4, Orem, UT 84057 (the "Business"), on the following terms and
conditions:
1. Purchase Price. Venturi's intention is to issue shares of its
common stock (no par value) to Seller in exchange for all of
the assets of Seller used in the Business. The shares of stock
to be issued to Seller shall be restricted stock, and the
ability of Seller to resell such stock shall be limited both
by applicable securities laws and by certain "leak-out"
provisions imposed by Venturi.
2. Representations, Warranties and Conditions. The Agreement will
contain usual and customary representations, warranties,
covenants, and other agreements (including a tax allocation
agreement), on behalf of Seller [and its stockholders] and the
Closing will be subject to usual and customary conditions,
including:
A. obtaining of necessary consents or approvals of
governmental bodies, lenders, lessors, or other third
parties;
B. absence of pending or threatened litigation regarding
the Assets, the Liabilities or the Agreement;
C. satisfactory completion of Venturi's due diligence
investigation;
<PAGE> 2
D. delivery of customary legal opinions, closing
certificates and other documentation.
3. Assumption of Liabilities. Venturi will not assume any of the
debts, liabilities or obligations of Seller except as
specifically set forth in an Assumption of Liabilities
Agreement that may be executed at the time of Closing, and
Seller shall indemnify Venturi and hold Venturi harmless with
respect to any such unassumed liabilities.
4. Employment Agreement. Venturi's obligation to close shall be
conditioned on, among other things, Blyle's entering into an
employment agreement with Venturi upon terms satisfactory to
Venturi.
5. Noncompetition Agreement. Venturi's obligation to close shall
be conditioned on, among other things, [name of Seller or
principal of Seller) entering into a noncompetition agreement
with Buyer on terms satisfactory to the Buyer.
6. Closing Date. The closing will take place as soon as the
conditions set forth herein are satisfied and as soon as final
documents can be prepared, but in any event no later than
August 31, 1998.
If the offer contained in this letter is acceptable to Seller, please
sign and return to Venturi a copy of this letter. Unless signed by you and
returned to Venturi within ten (10) days from the date of this letter, the offer
set forth herein shall be automatically revoked and shall become null and void.
Sincerely,
VENTURI TECHNOLOGY ENTERPRISES, INC.
By: /s/ John Hopkins
----------------------------------
John M. Hopkins
President
AGREED AND ACCEPTED:
Rob doing business as Disaster Plus Corp.
[Bleyl]
By:/s/ Robert Bleyl
-----------------------
Its: President
--------------------
Date:
<PAGE> 1
EXHIBIT 10.34
VENTURI TECHNOLOGY ENTERPRISES, INC.
1327 North State Street
Orem, Utah 84057
July 29, 1998
Mr. Bob L. Allen
3700 Sheridan
Fort Worth, Texas 76117
Re: Proposed Acquisition of Duct Cleaning Business of Bob L. Allen
Dear Mr. Allen:
This letter is to set forth the terms of our proposed
acquisition of all of the tangible and intangible assets of the duct cleaning
business you presently conduct in the Fort Worth, Texas area under your own name
and under the names Clean Aire International and Video Aire International (the
"Assets"). If the terms of this letter are acceptable, please sign a copy of
this letter and return it to us. We will then have our attorney prepare an Asset
Purchase Agreement (the "Agreement") between Venturi Technology Enterprises,
Inc., a Nevada corporation, as the buyer ("Venturi") and Bob L. Allen as the
seller ("Seller").
Venturi hereby offers to purchase all of the Assets on the
following terms and conditions:
1. Purchase Price. The Purchased Price for the Assets shall
include both Venturi common stock and cash, payable as
follows:
(a) At the Closing (defined as the date the
consideration is paid and ownership of the
assets is transferred to Venturi), Venturi
will issue to Seller a total of Ninety Six
Thousand (96,000) shares of its common
stock, 0.001 par value in exchange for all
of the Assets. The shares of stock to be
issued to Seller shall be restricted stock,
and the ability of Seller to resell such
stock shall be limited both by applicable
securities laws and by certain "leak- out"
provisions imposed by Venturi.
(b) At the Closing, Venturi shall deposit in an
escrow account $240,000 cash. The escrow
agent shall be instructed to pay the
$240,000 cash to Seller upon the expiration
of a 90 day rescission period to be
specified in the Asset Purchase Agreement,
provided that the Agreement has not been
rescinded as of that date, and to pay the
$240,000 cash to Venturi upon the expiration
of the 90
<PAGE> 2
Mr. Bob L. Allen
July 29, 1998
Page 2
day rescission period provided for in the
Asset Purchase Agreement if the Agreement is
rescinded by either party. Any interest
earned on the funds deposited in the escrow
account shall be paid to Venturi.
(c) Venturi shall pay to the Seller, as
additional consideration for this Agreement,
the cash sum of $360,000 upon the occurrence
of both of the following events, which
events may occur in either order and at
different times: i) the closing of an
underwritten secondary public offering of
Venturi common stock, and ii) the sale of at
least 25 video duct cleaning units by
Venturi per month for two consecutive
months.
2. Patent License. Seller shall grant to Venturi an exclusive
license to Seller's Patent No. 5,735,016 on a duct cleaning
apparatus. The patent license will be for a term of ten years,
renewable for another ten years, and will provide for a
royalty of the greater of $75 per duct cleaning machine sold
or $750 per month. The patent license will contain a provision
that the Patent will be assigned outright to Venturi in
exchange for 64,000 shares of Venturi common stock, at
Venturi's option, at such time as Venturi becomes profitable.
3. Representations, Warranties and Conditions. The Agreement will
contain usual and customary representations, warranties,
covenants, and other agreements on behalf of Seller and the
Closing will be subject to usual and customary conditions,
including:
A. obtaining of necessary consents or approvals of
governmental bodies, lenders, lessors, or other third
parties;
B. absence of pending or threatened litigation regarding
the Assets, the Liabilities or the Agreement;
C. satisfactory completion of Venturi's due diligence
investigation;
D. delivery of customary legal opinions, closing
certificates and other documentation.
4. Assumption of Liabilities. Venturi will not assume any of the
debts, liabilities or obligations of Seller except as
specifically set forth in an Assumption of Liabilities
Agreement that may be executed at the time of Closing, and
Seller shall indemnify Venturi and hold Venturi harmless with
respect to any such unassumed liabilities.
<PAGE> 3
Mr. Bob L. Allen
July 29, 1998
Page 3
5. Employment Agreement. Venturi's obligation to close shall be
conditioned on, among other things, Seller entering into an
employment agreement with Venturi upon terms satisfactory to
Venturi, including a base salary of Six Thousand Dollars
($6,000.00) per month.
5. Noncompetition Agreement. Venturi's obligation to close shall
be conditioned on, among other things, Seller entering into a
noncompetition agreement with Venturi on terms satisfactory to
Venturi.
6. Closing Date. The closing will take place as soon as the
conditions set forth herein are satisfied and as soon as final
documents can be prepared, but in any event no later than July
15, 1998.
If the offer contained in this letter is acceptable to Seller, please
sign and return to Venturi a copy of this letter. Unless signed by you and
returned to Venturi by the end of the day on July 1, 1998, the offer set forth
herein shall be automatically revoked and shall become null and void.
Sincerely,
VENTURI TECHNOLOGY ENTERPRISES, INC.
By:
--------------------------------
John Hopkins
President
AGREED AND ACCEPTED:
- ----------------------------------
Bob L. Allen
Date:
<PAGE> 1
Exhibit 10.35
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into as
of April 10, 1998, by and among Venturi Technology Enterprises, Inc., a Nevada
corporation doing business as Venturi Technologies, Inc. (the "Company"), CDL
Capital Corp., a Nevada corporation ("CDL"), CDL Emerging Growth Equity Fund I,
L.L.C., a Nevada limited liability company (the "Fund"), and Gaylord Karren and
John Hopkins, in their capacities, respectively, as stockholders (collectively,
the "Stockholders") and directors (collectively, the "Directors") of the
Company.
RECITALS
A. The Company requires additional capital to finance its business.
B. The Fund is in the business of providing or facilitating financing
for emerging growth companies. CDL is in the business of advising companies in
their business and financial matters and of facilitating the procurement of
needed financing.
C. The Company is authorized to issue 20 million shares of common
stock, $.001 par value per share (the "Common Stock"), of which 4,417,989 shares
have been issued and are outstanding (the "Shares"), and to issue 5 million
shares of preferred stock, $.001 par value per share, of which 64,410 shares,
designated as Series A Preferred Stock, have been issued and are outstanding,
and of which 200,000 shares, designated as Series B Preferred Stock, have been
issued and are outstanding.
D. The Fund is willing to provide financing to the Company upon the
terms and conditions stated in this Agreement. The Company is willing to accept
financing from the Fund upon such terms and conditions, and to act strictly in
compliance herewith.
E. The Stockholders and Directors have authorized the Company to
enter into this Agreement and to operate in strict compliance with its terms and
conditions. In addition, the Stockholders and Directors have agreed to cause the
Company to authorize and issue shares of Series C 6% Cumulative Convertible
Non-Voting Preferred Stock, as hereinafter defined, and to establish the
appropriate voting powers, designations, preferences, limitations, restrictions
and relative rights related thereto.
<PAGE> 2
AGREEMENT
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth herein, the parties to this Agreement
mutually agree as follows:
1. Recitals. The facts contained in the foregoing recitals are true,
complete and correct, and the statements made therein accurately reflect the
intentions of the parties hereto. Such recitals are incorporated into this
Agreement by this reference and form an integral part hereof. The parties agree
to any and all terms referred to in such recitals.
2. Purchase and Sale of Shares of Restricted Series C Preferred
Stock. Subject to the terms and conditions of this Agreement, the Company hereby
agrees to authorize and issue to the Fund, the Fund hereby agrees to purchase
from the Company, and the Stockholders and the Directors agree to cause the
Company to authorize and issue to the Fund, One Hundred Twenty-One Thousand Nine
Hundred Fifty-One (121,951) shares of the Company's restricted Series C 6%
Cumulative Convertible Non-Voting Preferred Stock (the "Series C Preferred
Stock") designated by the Directors with the voting powers, designations,
preferences, limitations, restrictions and relative rights stated in the
Unanimous Written Consent of the Board of Directors of the Company attached
hereto as Exhibit A and incorporated herein by this reference (the "Board
Consent"), at a purchase price of $2.05 per share, for a total initial purchase
price of Two Hundred Fifty Thousand dollars ($250,000) (the "Initial Purchase
Price").
3. Voting Powers, Designations, Preferences, Limitations,
Restrictions and Relative Rights of Series C Preferred Stock. The Series C
Preferred Stock will bear a six percent (6%) annual dividend, payable quarterly
in cash or in the equivalent number of shares of restricted Common Stock of the
Company, at the rate of $2.05 per share; and each share of Series C Preferred
Stock will be convertible into shares of restricted Common Stock on a
share-for-share basis, upon demand by the holder. The Directors hereby agree to
execute on the Closing Date, as hereinafter defined, the Board Consent, to
establish the voting powers, designations, preferences, limitations,
restrictions and relative rights incorporated therein for the Series C Preferred
Stock (the "Rights and Preferences") and to authorize the issuance of such
shares, among other things. The parties acknowledge and agree that the Board
Consent shall be controlling in the event of any conflict with this Section 3 as
to the Rights and Preferences of the Series C Preferred Stock.
4. Closing of Purchase of Shares of Series C Preferred Stock Under
Section 2. The closing ("Closing") of the Series C Preferred Stock purchase
transaction described in Section 2 shall occur at a time and place to be
determined by mutual agreement of the Fund and the Company. The Fund shall
deliver the Initial Purchase Price to the Company in cash, by bank check or by
wire transfer on April __, 1998 (the "Closing Date"). The Company shall issue
the Series C Preferred Stock immediately following the filing of the required
Certificate of Designation with the Nevada Secretary of State related to such
preferred stock and immediately shall deliver to the Fund one or more
certificates representing One Hundred Twenty-One Thousand Nine Hundred Fifty-One
(121,951) such shares and all rights appertaining thereto. Any and all actions
contemplated by this Agreement with respect to the purchase transaction
described in Section 2 and that have not been
2
<PAGE> 3
completed by the Closing shall be completed by the parties immediately following
the Closing. Time is of the essence of this Agreement, and all such actions
shall be completed not later than ten (10) days following the Closing. Failure
to complete such actions shall entitle any party adversely affected thereby to
rescind the actions of the parties at the Closing and the effectiveness of this
Agreement.
5. Financial Advisory Fee. Upon completion of the Closing of the sale
of shares of the Series C Preferred Stock to the Fund as provided in Section 2,
the Company shall pay to CDL a financial advisory fee in the amount of Twenty
and One-Half Cents ($.205) per share of Series C Preferred Stock so transferred.
6. Non-Accountable, Non-Refundable Selling Expense Allowance. Upon
the Closing of the sale of the shares of the Series C Preferred Stock to the
Fund as provided in Section 2, the Company shall pay to CDL a selling expense
allowance in the amount of three percent (3%) of the Initial Purchase Price, or
Seven Thousand Five Hundred dollars ($7,500), which expense allowance shall be
non-accountable and non-refundable, the purpose of which is to defray in part
the expenses of CDL associated with its acting as financial advisor to the
Company in connection with the transaction that is the subject of the Closing.
7. Fund's Right to Purchase Up To 414,634 Additional Shares of Series
C Preferred Stock. At any time or times until December 31, 1998, the Fund shall
have the right, but no obligation, to purchase from the Company, and to cause
the Company to authorize, as necessary, and to issue to the Fund, from time to
time, upon demand by the Fund, up to Four Hundred Fourteen Thousand Six Hundred
Thirty-Four (414,634) shares of restricted Series C Preferred Stock, in addition
to the shares of restricted Series C Preferred Stock purchased by the Fund under
Section 2. Any and all purchases by the Fund of any or all such additional
414,634 shares of restricted Series C Preferred Stock shall be made upon exactly
the same terms and conditions as those set out in Sections 2 through 6 hereof,
including, without limitation, the requirement of payment by the Company to CDL
of a ten-percent (10%) success fee (see Section 5) and of a three-percent (3%)
non-accountable, non-refundable selling expense allowance (see Section 6).
8. Fund Option. In addition to the rights of the Fund set out
elsewhere in this Agreement, for a period of five (5) years from the Closing
Date the Fund shall have the right to purchase from the Company, and to cause
the Company to authorize, as necessary, and to issue to the Fund, from time to
time, upon demand by the Fund, up to a total of Five Hundred Thirty-Six Thousand
Five Hundred Eighty-Five (536,585) additional shares of the Company's restricted
Series C Preferred Stock, at a purchase price of $2.05 per share (the "Fund
Option"). The total amount paid by the Fund, from time to time, to purchase
Series C Preferred Stock through exercise of the Fund Option shall be referred
to herein as the "Fund Option Purchase Price." The Fund Option shall be subject
to the terms and conditions contained in the Fund Option Agreement attached
hereto as Exhibit B and incorporated herein by this reference. The Company and
the Fund shall enter into the Fund Option Agreement at the Closing.
3
<PAGE> 4
9. CDL Common Stock Purchase Warrants. In addition to the rights of
the Fund set out elsewhere in this Agreement, upon the purchase of shares of the
Series C Preferred Stock by the Fund, whether under Section 2 or in accordance
with Section 7 (but not under Section 8), the Company shall issue to CDL a
five-year warrant, exercisable in whole or in part, at any time and from time to
time, to purchase, upon each exercise, one share of restricted Common Stock of
the Company, at $2.05 per share, for every two shares of Series C Preferred
Stock purchased by the Fund under Section 2 or 7 ("CDL Warrants"). If the entire
Fund Option is exercised by the Fund, then the Company shall issue to CDL an
additional five-year warrant, exercisable in whole or in part, at any time and
from time to time, to purchase, upon each exercise, one share of restricted
Common Stock, at $2.05 per share, for every two shares of Series C Preferred
Stock purchased by the Fund under the Fund Option ("Second CDL Warrants"). The
CDL Warrants and Second CDL Warrants shall be substantially in the form attached
hereto as Exhibit C and incorporated herein by this reference.
10. Registration Rights. At any time and every time the Company
registers Shares for sale to the public, it shall give the Fund and CDL advance
written notice of such action and permit the Fund and CDL to register all or any
number of the Shares that each owns, respectively, or that each is entitled to
receive upon conversion of shares of the Series C Preferred Stock or upon
exercise of the Fund Option, of the CDL Warrants or of the Second CDL Warrants.
Such incidental registration rights are referred to herein as the "Piggyback
Registration Rights." Each of the Fund and CDL also shall have the right to
cause Shares that each owns or to which each is entitled, respectively, to
receive, upon conversion of shares of the Series C Preferred Stock, or upon
exercise of the Fund Option, the CDL Warrants or the Second CDL Warrants, to be
registered for sale to the public on two (2) separate occasions (the "Demand
Registration Rights"). The Demand Registration Rights and the Piggyback
Registration Rights are described further in that certain Registration Rights
Agreement between the Company, the Fund and CDL attached hereto as Exhibit D and
incorporated herein by this reference (the "Registration Rights Agreement"). The
Company, the Fund and CDL will enter into the Registration Rights Agreement at
the Closing.
11. Confidentiality. The Company agrees that it shall not disclose, and
shall not include in any public announcement, the name of the Fund as an
investor, unless expressly approved in writing by the Fund or unless required by
applicable law, and then, only to the extent of the legal requirement.
12. Legal Fees. The Company shall pay all legal fees arising as a
result of the transactions contemplated under this Agreement.
13. Representations and Warranties of the Company. Except as otherwise
set forth in this Agreement, the Company hereby represents and warrants to the
Fund and CDL as follows:
a. Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Nevada, and is in good standing as a domestic corporation under the laws of said
State. The Company has all requisite
4
<PAGE> 5
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted and as the Company
contemplates conducting its business.
b. Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, to issue
and sell shares of the Series C Preferred Stock, to issue the Fund Option, the
CDL Warrants and the Second CDL Warrants hereunder, and to carry out and perform
its obligations under this Agreement.
c. Authorization. All corporate action on the part of the Company
and its Stockholders and Directors that is necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, for the
authorization, sale, issuance and delivery of the Series C Preferred Stock
(including, without limitation, any necessary or appropriate amendments to the
Company's Articles of Incorporation), or for the performance of any or all of
the Company's obligations hereunder, has been or will be taken prior to the
Company's execution of this Agreement.
d. Validity of Series C Preferred Stock. The Series C Preferred
Stock, when issued and transferred in compliance with the provisions of this
Agreement, will be duly authorized, validly issued and outstanding, fully paid
and non-assessable shares of the preferred stock of the Company.
14. Representations and Warranties of the Fund and of CDL. The Fund and
CDL hereby represent and warrant to the Company, with respect to the purchase or
prospective purchase of the Series C Preferred Stock, the Fund Option, the CDL
Warrants and the Second CDL Warrants, as the case may be, as follows:
a. Experience. The Fund and CDL have sufficient investment
experience to enable them to evaluate the merits and risks of their investments
in the Company, and they have the capacity to protect their own interests and to
bear the economic risk of their investments in the Company. The Fund and CDL are
aware of the several and various risks presented to a company such as the
Company and to the Company in particular. The Fund and CDL have conducted all of
the due diligence of the Company, its officers, Directors, Stockholders, markets
and prospects that they have deemed necessary in evaluating whether to purchase
the Series C Preferred Stock.
b. Investment. The Fund and CDL are acquiring the Series C
Preferred Stock, the Fund Option, the CDL Warrants and the Second CDL Warrants,
as the case may be, for investment for the Fund's and CDL's own respective
accounts, not as nominees or agents, and not with the view to, or for resale in
connection with, any distribution thereof. The Fund and CDL understand that the
Series C Preferred Stock has not been registered under the Securities Act of
1933, as amended (the "Securities Act"), by reason of a specific exemption from
the registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Fund's and CDL's representations as expressed herein or
otherwise provided to the Company. The Fund and CDL understand,
5
<PAGE> 6
acknowledge and agree that similar exemptions from registration are being relied
upon under the blue sky laws of the state in which the Fund and CDL reside.
c. Rule 144. The Fund and CDL acknowledge that the Shares are
"restricted securities" (as defined in the Securities Act) and, therefore, that
they must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available. The
Fund and CDL are aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private
placement, subject to the satisfaction of certain conditions, including, in case
a party has held the securities to be sold less than two years, the availability
of certain current public information about the Company, the resale's occurring
not less than one year after a party has purchased and paid for the security to
be sold, the sale's being effected through a "broker's transaction" or in
transactions directly with a "market maker," and the number of shares' being
sold during any three-month period not exceeding specified limitations.
d. Access to Data. The Fund and CDL have discussed the Company's
business, management and financial affairs with the officers, Directors,
employees and Stockholders, and have reviewed the Company's books and records
and obtained such information as they have considered relevant and important in
making a decision to purchase the Shares. The Fund and CDL have also had an
opportunity to ask questions of officers and Directors of the Company, which
questions were answered to the Fund's and CDL's satisfaction. The Fund and CDL
have concluded that they have sufficient information upon which to base a
decision to purchase Shares, Series C Preferred Stock, the Fund Option, the CDL
Warrants and the Second CDL Warrants, as the case may be.
15. Restrictions on Transferability; Compliance with Securities Act.
a. Restrictions on Transferability. The Fund and CDL acknowledge
that the Series C Preferred Stock has not been registered under the Securities
Act or any state blue sky laws, and that the transferability of an interest in
the Series C Preferred Stock is restricted by applicable federal and state
securities laws.
b. Restrictive Legend. Each certificate representing shares of the
Series C Preferred Stock and any other securities issued in respect thereto upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of this
Section or by applicable law) be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES
MAY BE SOLD OR TRANSFERRED ONLY IF THE SHARES ARE REGISTERED UNDER THE
ACT OR THE COMPANY
6
<PAGE> 7
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
The Company will instruct its transfer agent to remove the
legend set forth above from a stock certificate representing the Series
C Preferred Stock if the Company receives (i) a written representation
from the holder thereof to the effect that such holder has been the
beneficial owner of the securities for at least two years and has not
entered into any short sale or put or other option transaction that
would toll the holding period any time during the preceding two years
and, therefore, that he is free to sell the securities under Rule
144(k), and that all resales will be made by the record holder in
compliance with the Securities Act, or (ii) an opinion of counsel
satisfactory to the Company that the securities may be sold under Rule
144 and that such legend may be removed from the stock certificates.
16. Legal Counsel; Waiver of Conflict of Interest. The parties
have had the opportunity to consider the terms of this Agreement with their
respective legal counsel and have either obtained the advice of legal counsel in
connection with their execution hereof or do hereby expressly waive their right
to seek such legal counsel in connection with this transaction. CDL, the Fund
and the Company recognize that the law firm of Meyer, Hendricks, Bivens & Moyes,
P.A. is presently representing them in connection with this Agreement and the
transactions contemplated by this Agreement, and is likely to represent each of
them in the future. As a result, CDL, the Fund and Company waive any and all
conflicts of interest that may have existed, that may exist or that may arise in
the future as a result of such representations.
17. Notices. Any notice required hereunder to be given by any
party shall be in writing and shall be delivered personally or sent by first
class mail or by certified or registered mail, postage prepaid, or by private
courier, or by facsimile to the other party to the address set forth below or to
such other address as that party may designate from time to time according to
this provision. A notice delivered personally shall be effective upon receipt. A
notice sent by facsimile shall be effective 24 hours after the dispatch thereof.
A notice delivered by mail or by private courier shall be effective on the fifth
(5th) day after the day of mailing.
(a) To the Company, the Directors
or the Stockholders: 1327 North State Street
Orem, UT 84057
Fax: (801) 235-1731
with a copy to: Robert K. Rogers, Esq.
Meyer, Hendricks, Bivens & Moyes,
P.A.
3003 North Central Avenue
Suite 1200
Phoenix, AZ 85012
Fax: (602) 263-5333
7
<PAGE> 8
(b) To the Fund or CDL: CDL Emerging Growth Equity
Fund I, L.L.C./CDL Capital Corp.
692 East Cherapple Circle
Orem, UT 84057
Fax: (801) 222-9914
or to such other addresses as such parties may designate by notice
similarly given.
18. General Provisions.
a. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah applicable to
contracts entered into and to be performed entirely within such State.
b. Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
c. Entire Agreement; Amendment. This Agreement and the agreements
contemplated herein constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede all prior understandings and agreements with respect to the subject
matter hereof. No party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of such amendment, waiver,
discharge or termination is sought.
d. Survival of Warranties. The warranties, representations and
covenants contained in or made in this Agreement shall survive the execution and
delivery of this Agreement.
e. Expenses. The Company shall pay all costs, fees and expenses
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement.
f. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one and the same instrument.
g. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
h. Additional Agreements. This Agreement contemplates the
execution of other agreements, some of which are attached hereto as Exhibits or
are referred to as Exhibits but have not yet been attached. To the extent such
agreements have been completed and executed by the parties thereto, the terms of
such agreements, respectively, shall control the relationships of the parties as
to the specific subject matter they cover. To the extent such agreements have
not been
8
<PAGE> 9
completed or executed by the parties, the terms of this Agreement shall control
the relationships of the parties as to the subject matter covered.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
Company: Fund:
Venturi Technology Enterprises, Inc., CDL Emerging Growth Equity Fund I,
a Nevada corporation, doing business L.L.C.
as Venturi Technologies, Inc. By CDL Capital Corp., Manager
By: /s/ Gaylord Karren By: /s/ Kirby D. Cochran
------------------------------------ --------------------------------
Gaylord Karren Kirby D. Cochran, President
Chairman and Chief Executive Officer
GAYLORD KARREN CDL:
CDL Capital Corp.
By: /s/ Gaylord Karren By: /s/ Kirby D. Cochran
------------------------------------ --------------------------------
Gaylord Karren, Director and Kirby D. Cochran, President
Stockholder, Venturi Technology
Enterprises, Inc.
JOHN HOPKINS:
/s/ John Hopkins
- ----------------------------------------
John Hopkins, Director and Stockholder,
Venturi Technology Enterprises, Inc.
9
<PAGE> 10
Exhibit A
Board Consent
10
<PAGE> 11
Exhibit B
Fund Option Agreement
11
<PAGE> 12
Exhibit C
Form of CDL Warrants and Second CDL Warrants
12
<PAGE> 13
Exhibit D
Registration Rights Agreement
13
<PAGE> 1
Exhibit 10.36
PLACEMENT AGREEMENT
OF
VENTURI TECHNOLOGY ENTERPRISES, INC.
December 31, 1997
EQUITY SERVICES, LTD.
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Gentlemen:
The undersigned, Venturi Technology Enterprises, Inc., a Nevada
corporation (the "Company"), confirms its agreement with Equity Services, Ltd.,
a Nevis company ("ESL") as follows:
1. Description of Securities and Offering.
(a) ESL has agreed to privately place (the "Private Placement") Three
Hundred Thousand (300,000) shares (the "Shares") of the Company's Series B 6%
Cumulative Convertible Preferred Stock (the "Series B Preferred Stock"'), with a
stated value of Ten Dollars ($10.00) per Share (the "Private Placement Price"),
each Share being immediately convertible into five (5) shares of the Company's
common stock. The placement of the Shares is to occur as follows: (i) Two
Hundred Thousand (200,000) Shares with an aggregate value of One Million Dollars
($1,000,000.00) shall be placed on or before December 31, 1997 ("Phase I"); (ii)
Fifty Thousand (50,000) Shares with an aggregate value of One Million Dollars
($1,000,000.00) shall be placed on or before March 31, 1998 ("Phase II"); and
(iii) Fifty Thousand (50,000) Shares with an aggregate value of One Million
Dollars ($1,000,000.00) shall be placed on or before June 30, 1998 ("Phase III")
(Phase I, II and III are collectively referred to as the "Private Placement").
The closing of Phase I shall occur on or before December 31, 1997 (the "Phase I
Closing"), the closing of Phase II shall occur on or before March 31, 1998 (the
"Phase II Closing") and the closing of Phase III shall occur on or before June
30, 1998 (the "Phase III Closing"); provided, however, that ESL will be given an
opportunity to review the business and financial milestones set forth on Exhibit
"F" before proceeding with each Phase of the Private Placement.
The Shares shall have a cumulative dividend of six percent (6%) per
annum, payable on a fiscal quarterly basis, which shall be paid by the issuance
of shares of the Company's common stock, par value $0.001 per share (the "Common
Stock") based on the thirty (30) day average closing bid price of the Common
Stock prior to the dividend date.
<PAGE> 2
Immediately upon the occurrence of the Phase I Closing, Phase II
Closing and Phase III Closing, as the case may be, the Company shall grant the
holders of the Shares, the holders of the Common Stock issued as dividends on
the Shares and the holders of the Common Stock issued upon conversion of the
Shares, one (1) demand registration right beginning December 31, 1997, and
"piggyback" registration rights beginning immediately upon the closing of each
Phase. The terms of these registration rights, with respect to the Shares
subscribed for in each Phase, shall be as set forth in a Registration Rights
Agreement (herein so called) substantially in the form attached hereto as
Exhibit "A". The Company shall bear all expenses in connection with the
preparation and filing of such registration statements.
(b) The commissions to which ESL shall be entitled for such placement
shall be as follows: (i) a sum equal to seven percent (7%) of the total proceeds
resulting from the placement of the Shares; and (ii) Shares with value equal to
five percent (5%) of the total proceeds resulting from the placement of the
Shares (the "Placement Agent's Shares"). ESL shall also be paid (i) a sum equal
to three percent (3%) of the total proceeds resulting from the placement of the
Shares as a non-accountable expense allowance and (ii) an amount equal to the
legal fees of ESL's counsel not to exceed Ten Thousand and No/100 Dollars
($10,000.00). ESL will be paid the commission, the non-accountable expense
allowance and the legal fees of ESL's counsel simultaneously with the Closing of
each Phase.
(c) In addition, the Company agrees to sell to ESL, for an aggregate
price of $150, a five (5) year option ("ESL Purchase Option") to purchase up to
One Hundred Fifty Thousand (150,000) shares of Common Stock ("ESL's Option
Shares") at a price of Three Dollars ($3.00) per Option Share exercisable for a
period of five (5) years commencing one year after the completion of the Private
Placement or June 30, 1999, whichever is earlier. ESL shall be entitled to
purchase for Fifty Dollars ($50.00) an option to purchase Fifty Thousand
(50,000) ESL Option Shares immediately upon the occurrence of the Phase I
Closing. ESL shall be entitled to purchase for Fifty Dollars ($50.00) an option
to purchase Fifty Thousand (50,000) ESL Option Shares immediately upon the
occurrence of the Phase II Closing. Finally, ESL shall be entitled to purchase
for Fifty Dollars ($50.00) an option to purchase Fifty Thousand (50,000) ESL
Option Shares immediately upon the occurrence of the Phase III Closing. The
holders of ESL's Option Shares and the Placement Agent's Shares will have
registration rights as set forth in the Registration Rights Agreement
substantially in the form attached hereto as Exhibit "B".
2. Appointment of Placement Agent. ESL's appointment by the Company as
Placement Agent shall commence upon the date of the execution of this Agreement,
and shall continue until and through July 31, 1998, unless (i) the Shares shall
be completely sold prior to that date, (ii) the offering has been terminated by
written agreement between ESL and the Company, or (iii) this Agreement shall be
terminated at a prior date as provided herein.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 2
<PAGE> 3
3. Release of Placement Agent. ESL's commitment to serve as Placement
Agent on behalf of the Company is made subject to the release of ESL: (i) in the
event of war involving the United States of America, (ii) in the event of any
material adverse change in the business, property or financial condition of the
Company as reasonably determined by ESL, (iii) in the event of any action, suit
or proceeding at law or in equity against the Company, or by any Federal, State
or other commission, board or agency wherein any unfavorable decision would
materially affect the business, property, financial condition or income of the
Company (as reasonably determined by ESL), (iv) in the event of a breach by the
Company of any material covenant, representation or warranty contained in this
Agreement or (v) in the event of adverse market conditions (of which ESL shall
be the sole judge).
4. Representations and Warranties of the Company.
The Company represents and warrants to ESL as follows:
(a) The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Nevada, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification unless the failure to so register or qualify would
not have a material adverse effect on the financial condition of the Company
("Material Adverse Effect").
(b) The Company is in full compliance with all reporting requirements
of the National Association of Securities Dealers ("NASD"), and the Common Stock
is quoted on the NASDAQ Over-the-Counter Bulletin Board (trading symbol: VTIX).
(c) The Company has furnished ESL with copies of its Business Plan
dated August, 1997, and all documents filed with the Securities and Exchange
Commission (the "Commission") and NASD (collectively, the "Disclosure
Documents"). Except as disclosed in the Company's Business Plan, immediately
prior to the Phase I Closing there will be no other capital stock issued and
outstanding, nor will there be outstanding any rights to acquire, commitments to
issue or securities convertible into capital stock other than as previously
disclosed in writing to ESL. The Disclosure Documents at the time of their
filing did not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained therein,
in light of the circumstances under which they were made not misleading.
(d) Except as shown on the Company's most recent audited financial
statements dated 12/31/96, prepared by Child & Co., the Company's independent
certified public
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 3
<PAGE> 4
accountants, the Company will have no other indebtedness outstanding immediately
prior to the Closing of each Phase. (09/30/97 Interim.)
(e) Upon issuance at the closing of each Phase in accordance with this
Agreement, the Shares will be duly and validly authorized and issued, fully paid
and nonassessable, free from all encumbrances and restrictions other than
restrictions on transfer imposed by applicable securities laws and/or this
Agreement, and will not subject the holders thereof to personal liability by
reason of being such holders. The shares of Common Stock, when issued and
delivered upon conversion of the Series B Preferred Stock, the ESL Option Shares
and the Placement Agent's Shares, will be duly and validly authorized and
issued, fully paid and nonassessable, free from all encumbrances and
restrictions other than restrictions on transfer imposed by applicable
securities laws and/or this Agreement, and will not subject the holders thereof
to personal liability by reason of being such holders.
(f) This Agreement has been duly authorized, validly executed and
delivered on behalf of the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms, subject to general principles
of equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally, and the Company has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its obligations hereunder and thereunder.
(g) The execution and delivery of this Agreement, the issuance of the
Shares, the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock, the ESL Option Shares, and the Placement Agent's Shares and the
consummation of the transactions contemplated by the Investor Subscription
Agreements (herein so called) by the Company, will not conflict with or result
in a breach of or a default under any of the terms or provisions of, the
Company's articles of incorporation or By-laws, or of any material provision of
any indenture, mortgage, deed of trust or other material agreement or instrument
to which the Company is a party or by which it or any of its properties or
assets is bound, any material provision of any law, statute, rule, regulation,
or any existing applicable decree, judgment or order by any court, federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company, or any of its properties or assets and will not
result in the creation or imposition of any material lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries pursuant
to the terms of any agreement or instrument to which any of them is a party or
by which any of them may be bound or to which any of their property or any of
them is subject.
(h) No authorization, approval, filing with or consent of any
governmental body is required for the issuance and sale of the Shares.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 4
<PAGE> 5
(i) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or threatened
against or affecting the Company, or any of its properties, which would
reasonably be anticipated to result in any material adverse change in the
condition (financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the Company.
(j) Subsequent to the dates as of which information is given in the
Disclosure Documents, except as contemplated herein, the Company has not
incurred any material liabilities or material obligations, direct or contingent,
or entered into any material transactions not in the ordinary course of
business, and there has not been any change in its capitalization or any
material adverse change in its condition (financial or otherwise) net worth,
results of operations or prospects.
(k) The Company has conducted, is conducting and will conduct its
business so as to comply in all material respects with all applicable statutes
and regulations, and the Company is not charged with and, to the knowledge of
the Company, is not under investigation with respect to any violation of any
statutes or regulations nor is it the subject of any pending or threatened
adverse proceedings by any regulatory authority having jurisdiction over its
business or operations.
(1) Except as set forth in the Disclosure Documents, the Company has
good and marketable title to all properties and assets described therein as
owned by it, free and clear of all liens, charges, encumbrances, or
restrictions.
(m) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon.
(n) The Company has no knowledge of any tax deficiency that might be
asserted against it that might materially and adversely affect its business or
properties.
(o) The Company maintains insurance of the types and in amounts
generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies and businesses, including, but not
limited to, insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism, products
liability and all other risks customarily insured against, all of which
insurance is in full force and effect.
(p) No labor disturbance by the employees of the Company exists or is
imminent that could reasonably be expected to have a material adverse effect on
the conduct of the business, operations, financial condition, or income of the
Company.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 5
<PAGE> 6
(q) Neither the Company nor any employee or agent of the Company has
made any payment of funds of the Company or received or retained any funds in
violation of law.
(r) Subject in part to the truth and accuracy of the subscriber's
representations set forth in the Investor Subscription Agreement, the offer,
sale and issuance of the Shares are exempt from registration requirements of the
1933 Act, and neither the Company nor any authorized agent acting on its behalf
will take any action hereafter that will cause the loss of such exemption.
(s) The Company has sufficient title and ownership of all trademarks,
service marks, trade names, copyrights, patents, trade secrets and other
proprietary rights necessary for its business as now conducted and as proposed
to be conducted as described in the Disclosure Documents without any conflict
with or infringement of the rights of others. Except as set forth in the
Disclosure Documents, there are no material outstanding options, licenses or
agreements of any kind relating to the foregoing, nor is the Company bound by or
party to any material options, licenses or agreements of any kind with respect
to the trademarks, service marks, trade names, copyrights, patents, trade
secrets, licenses and other proprietary rights of any other person or entity.
The Company is not aware that any of its executive officers is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency that would interfere with the use of his or her best
efforts to promote the interest of the Company or that would conflict with the
Company's business as proposed to be conducted.
(t) Except for agreements explicitly contemplated hereby or set forth
in the Disclosure Documents, there are no agreements between the Company and any
of its officers, directors, affiliates or any affiliate thereof.
(u) As of the date of the Phase I Closing, and at such time as the
Phase II Closing and Phase III Closing, no representation or warranty of the
Company contained in this Section 4, and no statement contained in any exhibit,
schedule, certificate, list, summary or other disclosure document provided or to
be provided to ESL pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact which is necessary in
order to make statements contained therein not misleading.
The representations, warranties and covenants of the Company contained in this
Agreement shall inure to the benefit of each subscriber to the Private Placement
and such subscribers shall constitute identified third-party beneficiaries under
this Agreement. No termination, modification, or waiver of the representations,
warranties and covenants of the Company contained in this Agreement shall be
permitted in any manner adversely affecting their interests without their prior
written consent.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 6
<PAGE> 7
5. Affirmative Covenants of the Company.
(a) Upon the Phase I Closing or December 31, 1997, whichever is
earlier, the Company will use its best efforts to list shares of its Common
Stock on The NASDAQ SmallCap Market or a national securities exchange (such as
AMEX or NYSE) and, at a minimum, and use its best efforts to maintain such
listing for a period of five (5) years from the time of such listing.
(b) The Company will engage a financial public relations firm
acceptable to ESL prior to the Phase I Closing.
(c) The financial statements of the Company shall be audited by a "Big
Six" or such other independent public accounting firm as ESL may consent to.
Further, the Company shall not effect a change in its accounting firm to other
than a "Big Six" firm for a period of two (2) years following the Phase III
Closing or June 30, 1998, whichever is earlier.
(d) The Company shall be responsible for and shall bear all expenses
directly and necessarily incurred in connection with the Private Placement,
including but not limited to, the cost of preparing, printing and delivering all
placement and selling documents, including but not limited to the Placement
Agreement, Investor Subscription Agreements, Registration Rights Agreements,
Placement Agent's Option Agreements and blue sky memorandum and stock
certificates; blue sky fees, filing fees, legal fees and disbursements of
counsel in connection with blue sky matters; fees and disbursements of the
transfer and warrant agent; the cost of two (2) sets of bound closing volumes
for ESL and its counsel; the cost of three (3) tombstone advertisements, at
least one (1) of which shall be in a national business newspaper, one (1) of
which shall be in a major Texas newspaper and one (1) shall be in a publication
chosen by ESL; an amount equal to the legal fees of ESL's counsel, not to exceed
Ten Thousand Dollars ($10,000.00); and the cost of five (5) lucite tombstones
for ESL and its counsel (collectively, the "Company Expenses"). If the Private
Placement is not completed because the Company prevents it or because of a
breach by the Company of any covenants, representations or warranties contained
herein, the Company's liability for such expense allowance shall be limited to
Ten Thousand and No/100 Dollars ($10,000.00).
(e) The Company will, and will cause its subsidiaries, if any, to do
the following: (i) maintain and preserve its and their respective businesses
consistent with normal business practices; (ii) conduct its and their respective
businesses, taken together as a group, in an orderly, efficient and customary
manner consistent with normal business practices; and (iii) keep and maintain
all of its and their respective properties in good working order and condition.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 7
<PAGE> 8
(f) The Company will deliver to ESL for a period of three (3) years
from the Phase III Closing or June 30, 1998, whichever is earlier:
(i) within thirty (30) days after the close of each calendar
month, except with respect to the last month of each fiscal year, a
copy of its consolidated balance sheet as of the close of such month
and its profit and loss statement and surplus reconciliation for that
month, all prepared in accordance with generally accepted accounting
principles consistently applied, and certified as being fairly
presented in all material respects by the Company's President or its
Chief Financial Officer;
(ii) within thirty (30) days after the close of each calendar
month, a copy of the internal accounting reports prepared by the
Company for its officers and/or directors;
(iii) at any time within the period from thirty (30) days prior to
and until thirty (30) days after the start of any fiscal year,
financial projections of the Company and its subsidiaries, if any, for
such fiscal year prepared in reasonable detail, which financial
projections shall be presented to the Company's Board of Directors for
their approval at their regular meeting first following the preparation
of such projections;
(iv) promptly upon the filing thereof, all reports and statements
filed with the Commission (or any governmental authority succeeding to
any of its functions) or with any securities exchange; and
(v) such other information and data with respect to the Company
or any of its subsidiaries, if any, as from time to time may be
reasonably requested by ESL (including, without limitation, such other
information as the Company shall have supplied to any of its security
holders in their capacity as such) to the extent the Company possesses
such information or can acquire it without unreasonable effort or
expense.
(g) The Company will cause at least One Million and No/100 Dollars
($1,000,000.00) of "key man" life insurance to be written on each of the lives
of Gaylord Karren and John Hopkins. Such "key man" life insurance will be kept
in force for a minimum period of either three (3) years from the Phase III
Closing or June 30, 1998, whichever is earlier, or the term of the employment
agreements between the Company and Gaylord Karren and John Hopkins, whichever is
longer.
(h) For a period of three (3) years from the Phase III Closing or June
30, 1998, whichever is earlier, the Company, at its expense, shall, upon request
by ESL from time to time, provide ESL with copies of the Company's daily
transfer sheets.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 8
<PAGE> 9
(i) The Company and its President shall call a meeting of the Board of
Directors at such times as may be necessary but at least once every fiscal
quarter. The Board of Directors shall include at least two (2) non-affiliated
directors to be elected within ninety (90) days of the Closing, which directors
shall not be officers or employees of the Company ("Outside Directors"). In
addition, the Company will allow one (1) designated representative of ESL to
receive timely notice of, attend and make comments at all meetings of its Board
of Directors. (Such designated representative shall also be sent all standard
communications and notifications from the Company to the members of its Board of
Directors concerning annual and special meetings in the same fashion and on the
same basis, including with respect to timing, as he would if he were a member of
the Board of Directors.) Further, for a period of five (5) years from the Phase
I Closing or December 31, 1997, whichever is earlier, the holders of the Series
B Preferred Stock shall have the right to designate one (1) member of the Board
of Directors and the Company shall cause such designee to be elected to the
Board of Directors of the Company.
(j) The Company will cause the Board of Directors to maintain a
Compensation Committee, which shall be comprised of three (3) members, of which
one (1) member shall be a designated representative of the holders of the Series
B Preferred Stock. The Compensation Committee shall have authority with respect
to the matters set forth in clauses (i) and (ii) of paragraph (n) of this
Section 5.
(k) The Company will cause the Board of Directors to maintain an Audit
Committee, which shall be comprised of three (3) members, of which one (1)
member shall be the designated representative of the holders of the Series B
Preferred Stock.
(1) The management of the Company shall prepare and deliver to ESL and
each subscriber to the Private Placement (unless ESL and such subscribers shall
waive such right in writing) monthly reports highlighting business developments
and activities, with those persons having assigned responsibilities reporting on
operations and activities in their areas of responsibility.
(m) The Company will promptly send to ESL and each subscriber to the
Private Placement, in no event later than ninety (90) days following each
meeting (unless ESL and such subscriber shall waive such right in writing)
copies of the complete minutes of each meeting of its Board of Directors,
executive and similar committees thereof.
(n) Without in any way limiting the generality of matters which may be
appropriate for consideration or action by the Board of Directors, prior to
taking action with respect to any of the following items, the Board of Directors
or, in the case of clauses (i) and (ii), the Compensation Committee thereof,
must approve the following actions:
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 9
<PAGE> 10
(i) Changes in officers and their compensation, including,
without limitation, all significant employee benefits other than health
care and similar insurance plans;
(ii) All incentive programs (and revisions thereto) for
employees such as stock option plans, equity plans, bonus plans, etc.;
(iii) Company budgets, which shall be submitted within the period
from thirty (30) days prior to and until thirty (30) days after the
commencement of each fiscal year covering sales, direct costs, indirect
costs, profit targets, capital expenditures, and cash flow;
(iv) Major appropriations in excess of One Hundred Thousand
Dollars ($100,000.00) for any capital items not in the Company budget
for the fiscal year;
(v) Major new facilities and their location, excluding any
small leased facilities in the local area so long as their annual
rental obligation does not exceed One Hundred Thousand Dollars
($100,000.00) per year;
(vi) All matters pertaining to mergers and acquisitions, without
exception;
(vii) Purchase contracts of a major nature;
(viii) Sales contracts of an unusual size or complexity;
(ix) Sale or purchase of patents, rights, or any royalty or
license agreements, other than in the ordinary course of business;
(x) Warranty and distribution policies of an unusual nature
which are not representative of industry patterns;
(xi) Financing programs and policies applicable to public
offerings, private placements, and long-term debt;
(xii) Treasury policies;
(xiii) Selection of auditors and corporate counsel;
(xiv) Banking resolutions;
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 10
<PAGE> 11
(xv) Cash policies such as pension funds, investments, etc.,
other than normal bank deposits;
(xvi) All matters of litigation in which the Company is to be the
plaintiff or other initiating party; and
(xvii) Conflict of interest matters.
(o) The management of the Company shall notify and consult with the
Board of Directors (by written, telegraphic or telephonic notice) prior to
taking any initial action with respect to any of the following matters (it being
understood that the Board of Directors will determine the propriety of further
or alternative action with respect to such matters at their next meeting):
(i) All matters of personnel policies as they apply to any
labor agreements or organization of unions;
(ii) All matters of public policy, wherein the Company is to be
involved in any community, political, or religious cause or program;
(iii) All matters of litigation that involve or may involve the
Company as a defendant;
(iv) Audit programs and policies; and
(v) Any operating decisions which in the judgment of the
President and Chief Executive Officer should be presented to the Board.
(p) The Company shall file a Certificate of Designation with the
Secretary of State of Nevada setting forth the rights and preferences of the
Series B Preferred Stock substantially in the form attached hereto as Exhibit
"C'.
6. Negative Covenants of the Company.
(a) During the completion of the Private Placement and for a period of
eighteen (18) months following the Phase III Closing or June 30, 1998, whichever
is earlier, the Company will not, without the prior written consent of ESL,
grant any additional options to purchase securities of the Company to employees
that are exercisable at a price below the greater of the Private Placement Price
or the fair market value of the securities on the date of grant.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 11
<PAGE> 12
(b) During the completion of the Private Placement and for a period of
three (3) years following the Phase III Closing or June 30, 1998, the Company
will not, without the prior written consent of ESL, offer or sell any of its
securities in reliance on Regulation S of the Securities Act of 1933, as amended
(the "Act").
(c) All of the current directors and executive officers of the Company
and all current Shareholders of the Company who individually own more than five
percent (5%) of the Company's outstanding Common Stock agree that their shares
will be subject to the provisions of a Lock-Up Agreement (herein so called)
substantially in the form attached hereto as Exhibit "D". The Shares subject to
the Lock-Up Agreement shall not be assignable or transferrable. The Company will
take all such steps as necessary to enforce the provisions of the Lock-Up
Agreement, including, but not limited to, notifying the Company's transfer agent
of the existence of the Lock-Up Agreements. The remaining shares shall be
released from the terms of the Lock-Up Agreement in accordance with its terms.
(d) The Company will not use any proceeds from the Private Placement to
repay any indebtedness of the Company, including but not limited to any
indebtedness to current executive officers or principal shareholders of the
Company.
(e) The Company shall not, without the prior written consent of ESL and
all holders of the Series B Preferred Stock, create any new class or series of
stock having a dividend and/or liquidation preference senior to the Series B
Preferred Stock or increase the size of the authorized number of shares of
Series B Preferred Stock.
(f) The compensation of the executive officers of the Company as set
forth in the Company's Business Plan not increase until thirteen (13) months
after the Closing.
(g) The Company will not issue press releases or engage in other
publicity without ESL's prior written consent prior to the completion of the
Private Placement and for a period of eighteen (18) months from the Phase III
Closing or June 30, 1998, whichever is earlier.
(h) The compensation of the executive officers of the Company shall be
subject to the approval of ESL and shall not be increased during the completion
of the Private Placement and for a period of thirteen (13) months from the Phase
III Closing or June 30, 1998, whichever is earlier; provided, however, that such
compensation shall be no less than Ninety Six Thousand Dollars ($96,000.00) per
year for the first year after the Phase III Closing or June 30, 1998, whichever
is earlier, and One Hundred Twenty Thousand Dollars ($120,000.00) per year for
the second and subsequent years after the Phase III Closing or June 30, 1998,
whichever is earlier.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 12
<PAGE> 13
7. Representations and Warranties of ESL.
ESL represents, warrants and covenants to the Company as follows:
(a) ESL has been duly incorporated and is validly existing and in good
standing under the laws of Nevis [sic], with full corporate power and authority
to own, lease and operate its properties and to conduct its business as
currently conducted.
(b) This Agreement has been duly authorized, validly executed and
delivered on behalf of ESL and is a valid and binding agreement of ESL
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally, and ESL has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and to
perform its obligations hereunder and thereunder.
8. Indemnification. The Company hereby agrees to indemnify and hold
harmless ESL and its officers, directors, shareholders, employees, agents and
attorneys against any and all losses, claims, damages, liabilities and expenses
incurred by each such person in connection with defending or investigating any
such claims or liabilities, including any costs or expenses incurred, to which
any such indemnified party may become subject under the Securities' Act, or
under any other statute, at common law or otherwise, insofar as such losses,
claims, demands, liabilities and expenses arise out of or are based upon, in
whole or in part, (i) any untrue statement or alleged untrue statement of a
material fact made by the Company in this Agreement or any exhibit, schedule,
certificate, list, summary or Disclosure Document provided to ESL, (ii) any
omission or alleged omission of a material fact with respect to the Company in
this Agreement or any exhibit, schedule, certificate, list, summary or
Disclosure Document provided to ESL, or (iii) any breach of any representation,
warranty or agreement made by the Company in this Agreement or any exhibit,
schedule, certificate, list, summary or Disclosure Document provided to ESL.
9. Mergers and Acquisitions.
(a) The Company agrees that ESL will be paid a finder's fee of seven
percent (7%) of the first $1,000,000.00, six percent (6%) of the second
$1,000,000.00, five percent (5%) of the next $1,000,000.00, four percent (4%) of
the next $1,000,000.00 and three percent (3%) of the excess, if any, over
$4,000,000.00 of the consideration involved in any merger or acquisition
transaction (or equivalent) consummated by the Company, in which ESL introduced
the other party to the Company during a period ending five (5) years from the
Closing (an "Introduced Transaction"); and
(b) Any such finder's fee due to ESL will be paid in cash at the
closing of the particular Introduced Transaction for which the finder's fee is
due.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 13
<PAGE> 14
10. Conditions Precedent to Closing.
(a) Prior to the closing of each Phase of the Private Placement, ESL
shall have received an opinion addressed to Equity Services, Ltd. and each
subscriber to the Private Placement, from counsel for the Company, confirming
the representations and warranties of the Company contained in Section 4 above,
substantially in the form attached hereto as Exhibit "E".
(b) ESL shall have received a fully executed Placement Agent's Option
Certificate from the Company for the options earned upon the closing of each
Phase of the Private Placement before the closing of each Phase in which they
are earned.
(c) ESL shall have received a fully executed Registration Rights
Agreement with respect to the Placement Agent's Shares and the ESL Option Shares
from the Company for the Placement Agent's Shares and the ESL Option Shares
earned upon the closing of each Phase of the Private Placement.
(d) ESL shall have received a fully-executed Lock-Up Agreement from
each shareholder of the Company as set forth in Paragraph 6(c) hereof.
(e) ESL shall have received a certified copy of the resolution of the
Board of Directors of the Company authorizing the transactions contemplated
herein.
(f) The Company shall have filed with the Office of the Secretary of
State of Nevada a Certificate of Designation acceptable to ESL, substantially in
the form attached hereto as Exhibit "C".
(g) The Company shall have amended its Bylaws in such a manner as to
make its Bylaws consistent with the terms and conditions of this Agreement and
the transactions contemplated herein, a copy of which will have been provided to
ESL.
(h) Prior to the closing of each Phase of the Private Placement, the
escrow agent, Cardinal International Bank & Trust Company, Ltd. (the "Escrow
Agent") shall have received a certificate representing the Placement Agent's
Shares earned for each such Phase.
(i) Prior to the closing of each of Phase I, Phase II and Phase III of
the Private Placement, the Escrow Agent shall have received a fully executed
subscription agreement from each subscriber to Phase I, Phase II and Phase III,
respectively.
(j) ESL shall have received an opinion addressed to ESL and each
subscriber to the Private Placement, from counsel satisfactory to ESL,
concerning the merger of the
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 14
<PAGE> 15
Company with and into Hi-Tek Carpet Care, Inc., in form and substance
satisfactory to ESL.
(k) Prior to the closing of each Phase of the Private Placement, ESL
shall have had the opportunity to review the business and financial milestones
set forth on Exhibit "F' and to ascertain the Company's compliance therewith.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective upon its execution by ESL.
(b) This Agreement shall terminate on the earlier of July 31, 1998, or
the consummation of the Private Placement.
12. Parties. This Agreement shall inure to the benefit of and be binding
upon ESL, the Company and ESL's and its respective successors and assigns.
Except as provided for in Section 4 hereinabove, nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person or
corporation, other than the parties hereto and their respective successors and
assigns and the controlling persons, officers, directors, employees, agents and
attorneys of the parties, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision herein contained. This Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective successors
and assigns and said controlling persons, officers, directors, employees, agents
and attorneys, and for the benefit of no other person or corporation.
13. Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or telecopied (followed by
registered mail or overnight courier), initially to the address set forth below,
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 13.
if to the Company:
Venturi Technology Enterprises, Inc.
1327 N. State Street
Orem, Utah 84057
Attn: Gaylord Karren, President & CEO
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
with a copy (which shall not constitute notice) to:
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 15
<PAGE> 16
Mackey, Price & Williams
900 First Interstate Plaza
170 South Main Street
Salt Lake City, Utah 84101-1655
Attn: Randy K. Johnson, Esq.
Telephone: (801) 575-5000
Telecopier: (801) 575-5006
if to ESL:
Equity Services, Ltd
St. Andrews Court
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
Attn: Lynn Turnquest, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, registered mail, return receipt requested, postage
prepaid, if mailed; when received after being deposited in the regular mail; the
next business day after being deposited with an overnight courier, if deposited
with a nationally recognized, overnight courier service; when receipt is
acknowledged, if telecopied (subject to follow up as discussed above).
14. Attorneys' Fees. If any action is necessary to enforce or interpret
the terms of this agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs, in addition to any other relief to which
he is or may be entitled. This provision shall be construed as applicable to the
entire agreement.
15. Time of Essence. Time shall be of the essence of this Agreement.
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 16
<PAGE> 17
16. Construction. This Agreement shall be construed in accordance with the
internal laws of the State of Nevada.
17. Execution. This Agreement may be executed in any number of
counterparts each of which taken together shall constitute one and the same
instrument.
18. Joint Drafting of Agreement. This Agreement has been prepared by the
joint efforts of the respective counsel for each of the parties hereto and shall
not be construed against a particular party simply by reason of such party being
the drafting party.
19. Entire Agreement. This Agreement, together with those certain Investor
Subscription Agreements by and between the Company and each subscriber to the
Private Placement, constitute the entire understanding by and between the
parties with respect to the subject matter hereof. This Agreement can only be
modified, including any extension of the offering period, by a written agreement
duly signed by persons authorized to sign agreements on behalf of the respective
parties.
20. Facsimile Signature. This Agreement may be executed by facsimile copy
and any such facsimile copy bearing the facsimile signature of any party hereto
shall have full legal force and effect and shall be binding against the party
having executed this Agreement by facsimile.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 17
<PAGE> 18
If the foregoing is in accordance with your understanding, please sign
below and return to us a counterpart hereof, and upon your acceptance hereof,
this letter and the acceptance hereof shall constitute a binding agreement
between ESL and the Company.
Very truly yours,
VENTURI TECHNOLOGY
ENTERPRISES, INC.
By: /s/ Gaylord Karren
-------------------------------------------
GAYLORD KARREN
Chairman and CEO
Accepted and agreed to as of the
date first above written by:
EQUITY SERVICES, LTD.
By: /s/ Lynn Turnquest
--------------------------------
LYNN TURNQUEST, Director
PLACEMENT AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 18
<PAGE> 1
Exhibit 10.37
INVESTOR SUBSCRIPTION AGREEMENT
OF VENTURI TECHNOLOGY ENTERPRISES, INC.
THIS INVESTOR SUBSCRIPTION AGREEMENT (the "Agreement") is made and
entered into as of this 31st day of December, 1997, by and between VENTURI
TECHNOLOGY ENTERPRISES, INC., a Nevada corporation ("Seller"), with offices at
1327 N. State Street, Orem, Utah 84057 and ENTREPRENEURIAL INVESTORS, LTD., a
Bahamas company ("Buyer"), with offices at Citibank Building, 2nd Floor, East
Mall Drive, Freeport, Bahamas, providing for the purchase and sale of Two
Hundred Thousand (200,000) shares (the "Shares") of Series B 6% Cumulative
Convertible Preferred Stock of Seller (the "Series B Preferred Stock"),
convertible into shares of the common stock, par value $0.001 per share (the
"Common Stock"), of Seller. Seller and Buyer (collectively, the "Parties")
hereby represent and agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(i) Buyer hereby subscribes for Two Hundred Thousand (200,000) Shares
of Series B Preferred Stock in exchange for One Million and no/100 Dollars
($1,000,000.00) in cash (the "Purchase Price"). Buyer shall pay the Purchase
Price for the Shares by wire transfer of immediately available, federal funds in
United States dollars against counter-delivery of the Shares by Seller. The
closing of the purchase and sale of the Shares (the "Closing") shall take place
on or about December 31, 1997, at 10:00 a.m. at the offices of Cardinal
International Bank & Trust Co., Ltd., Norfolk House, 3rd Floor, Nassau, Bahamas
(the "Escrow Agent").
(ii) The rights, privileges and preferences of the Series B Preferred
Stock, shall be as set forth in the Certificate of Designation attached as
Exhibit "A" to this Agreement.
2. BUYER'S REPRESENTATIONS AND COVENANTS.
Buyer represents, warrants and covenants to Seller as follows:
(i) This Agreement has been duly authorized, validly executed and
delivered on behalf of Buyer and is a valid and binding agreement of Buyer
enforceable in accordance with its terms, subject to general principles of
equity and of bankruptcy or other laws affecting the enforcement of creditors'
rights;
(ii) Buyer is purchasing the Shares for its own account for investment
purposes only and not with a view towards distribution. Buyer understands and
agrees that it must bear the economic risks of investments for an indefinite
period of time. Buyer has received and carefully reviewed copies of the
Disclosure Documents (as defined in Section 3). Buyer understands that the offer
and sale of the Shares are being made only by means of this Agreement. No
representations or warranties have been made to Buyer by Seller, the officers or
directors of Seller, or any agent, employee or affiliate of any of them, except
as specifically set forth herein or in the placement agent's agreement between
the Seller and Equity Services, Ltd (the "Placement Agreement"). Buyer shall be
a third party beneficiary of the representations, warranties and covenants made
by Seller in the Placement Agreement. Buyer is aware that the purchase of the
Shares involves a high degree of risk and that it may sustain, and has the
financial ability to sustain,
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC.
<PAGE> 2
the loss of its entire investment. Buyer has had the opportunity to ask
questions of, and receive answers satisfactory to it from, Seller's management
regarding Seller. Buyer understands that no federal or state governmental
authority has made any finding or determination relating to the fairness of an
investment in the Shares and that no federal or state governmental authority has
recommended or endorsed, or will recommend or endorse, the investment herein.
Buyer has significant assets and upon consummation of the purchase of the Shares
will continue to have significant assets exclusive of the Shares. Buyer has not
been organized for the sole purpose of acquiring the Shares;
(iii) Buyer (a) is not a citizen or resident of the United States of
America, (b) is not an entity organized under any laws of any state of the
United States of America, and (c) does not have offices in the United States of
America;
(iv) Buyer is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act");
(v) Buyer understands that the Shares are being offered and sold to
it in reliance on specific provisions of federal and state securities laws and
that Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgements and understandings of Buyer set forth
herein in order to determine the applicability of such provisions;
(vi) Buyer is capable of evaluating the risks and merits of this
investment by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters;
(vii) Buyer shall execute the Registration Rights Agreement in the
form attached hereto as Exhibit "B";
(viii) Buyer has not employed any investment banker, broker or finder
or incurred any liability for any brokerage fees, commissions or finder's fees
in connection with the transactions contemplated by this Agreement; and
(ix) Buyer understands that neither the Shares nor the shares of
Common Stock issuable upon conversion of the Series B Preferred Stock have been
registered under the Securities Act and therefore it cannot dispose of any or
all of the Shares or Common Stock unless and until such Shares or Common Stock,
as the case may be, are subsequently registered under the Securities Act or
exemptions from such registration are available. Buyer acknowledges that a
legend substantially as follows will be placed on the certificates representing
the Shares and/or Common Stock:
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 1
<PAGE> 3
THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED SECURITIES WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. THE ISSUER OF THESE SECURITIES WILL NOT TRANSFER SUCH
SECURITIES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE ISSUER THAT THE
REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY
APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
3. SELLER'S REPRESENTATIONS AND COVENANTS.
Seller represents, warrants and covenants to Buyer as follows:
(i) The Seller has been duly incorporated and is validly existing
and in good standing under the laws of the State of Nevada, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification.
(ii) The Seller is in full compliance with all reporting requirements
of the National Association of Securities Dealers ("NASD"), and the Common Stock
is quoted on the NASDAQ Over-the-Counter Bulletin Board (trading symbol: VTIX).
(iii) The Seller has furnished Equity Services, Ltd. ("ESL") with
copies of the Seller's Business Plan dated August, 1997, and all documents filed
with the Securities and Exchange Commission (the "Commission") and the NASD
(collectively, the "Disclosure Documents"). Except as disclosed in Seller's
Business Plan, immediately prior to Closing there shall be no other capital
stock issued and outstanding, nor shall there be outstanding any rights to
acquire, commitments to issue or securities convertible into capital stock other
than as disclosed in the Disclosure Documents or as previously disclosed in
writing to ESL. The Disclosure Documents at the time of their filing did not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made not misleading.
(iv) Except as shown on the Seller's most recent audited financial
statements dated 12/31/96, prepared by Childs & Co., the Seller's independent
certified public accountants, the Seller has no other indebtedness outstanding
immediately prior to the Closing. (09/30/97 Interim.)
(v) Upon issuance at the Closing in accordance with this Agreement,
the Shares will be duly and validly authorized and issued, fully paid and
nonassessable, free from all encumbrances and restrictions other than
restrictions on transfer imposed by applicable securities laws and/or this
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 2
<PAGE> 4
Agreement, and will not subject the holders thereof to personal liability by
reason of being such holders. The shares of Common Stock, when issued and
delivered upon conversion of the Series B Preferred Stock, will be duly and
validly authorized and issued, fully paid and nonassessable, free from all
encumbrances and restrictions other than restrictions on transfer imposed by
applicable securities laws and/or this Agreement, and will not subject the
holders thereof to personal liability by reason of being such holders.
(vi) This Agreement has been duly authorized, validly executed and
delivered on behalf of the Seller and is a valid and binding agreement of the
Seller enforceable in accordance with its terms, subject to general principles
of equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally, and the Seller has full power and authority to
execute and deliver this Agreement and the other agreements and documents
contemplated hereby and to perform its obligations hereunder and thereunder.
(vii) The execution and delivery of this Agreement, the issuance of
the Shares, the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock, and the consummation of the transactions contemplated by this
Agreement, will not conflict with or result in a breach of or a default under
any of the terms or provisions of, the Seller's articles of incorporation or
By-laws, or of any material provision of any indenture, mortgage, deed of trust
or other material agreement or instrument to which the Seller is a party or by
which it or any of its properties or assets is bound, any material provision of
any law, statute, rule, regulation, or any existing applicable decree, judgment
or order by any court, federal or state regulatory body, administrative agency,
or other governmental body having jurisdiction over the Seller, or any of its
properties or assets and will not result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of the Seller
or any of its subsidiaries pursuant to the terms of any agreement or instrument
to which any of them is a party or by which any of them may be bound or to which
any of their property or any of them is subject.
(viii) No authorization, approval, filing with or consent of any
governmental body is required for the issuance and sale of the Shares.
(ix) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or threatened
against or affecting the Seller, or any of its properties, which would
reasonably be anticipated to result in any material adverse change in the
condition (financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the Seller.
(x) Subsequent to the dates as of which information is given in the
Disclosure Documents, except as contemplated herein, the Seller has not incurred
any material liabilities or material obligations, direct or contingent, or
entered into any material transactions not in the ordinary course of business,
and there has not been any change in its capitalization or any material adverse
change in its condition (financial or otherwise) net worth, results of
operations or prospects.
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 3
<PAGE> 5
(xi) The Seller has conducted, is conducting and will conduct its
business so as to comply in all material respects with all applicable statutes
and regulations, and the Seller is not charged with and, to the knowledge of the
Seller, is not under investigation with respect to any violation of any statutes
or regulations nor is it the subject of any pending or threatened adverse
proceedings by any regulatory authority having jurisdiction over its business or
operations.
(xii) Except as set forth in the Disclosure Documents, the Seller has
good and marketable title to all properties and assets described therein as
owned by it, free and clear of all liens, charges, encumbrances, or
restrictions.
(xiii) The Seller has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon.
(xiv) The Seller has no knowledge of any tax deficiency that might be
asserted against it that might materially and adversely affect its business or
properties.
(xv) The Seller maintains insurance of the types and in amounts
generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies and businesses, including, but not
limited to, insurance covering all real and personal property owned or leased by
the Seller against theft, damage, destruction, acts of vandalism, products
liability and all other risks customarily insured against, all of which
insurance is in full force and effect.
(xvi) No labor disturbance by the employees of the Seller exists or
is imminent that could reasonably be expected to have a material adverse affect
on the conduct of the business, operations, financial condition, or income of
the Seller.
(xvii) Neither the Seller nor any employee or agent of the Seller has
made any payment of funds of the Seller or received or retained any funds in
violation of law.
(xviii) Subject in part to the truth and accuracy of Buyer's
representations set forth in this Agreement, the offer, sale and issuance of the
Shares are exempt from registration requirements of the 1933 Act, and neither
the Seller nor any authorized agent acting on its behalf will take any action
hereafter that will cause the loss of such exemption.
(xix) The Seller has sufficient title and ownership of all
trademarks, service marks, trade names, copyrights, patents, trade secrets and
other proprietary rights necessary for its business as now conducted and as
proposed to be conducted as described in the Disclosure Documents without any
conflict with or infringement of the rights of others. Except as set forth in
the Disclosure Documents, there are no material outstanding options, licenses or
agreements of any kind relating to the foregoing, nor is the Seller bound by or
party to any material options, licenses or agreements of any kind with respect
to the trademarks, service marks, trade names, copyrights, patents, trade
secrets, licenses and other proprietary rights of any other person or entity.
The Seller is not aware that any of its executive officers is obligated under
any contract (including licenses, covenants or
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 4
<PAGE> 6
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would interfere with
the use of his or her best efforts to promote the interest of the Seller or that
would conflict with the Seller's business as proposed to be conducted.
(xx) Except for agreements explicitly contemplated hereby or set
forth in the Disclosure Documents, there are no agreements between the Seller
and any of its officers, directors, affiliates or any affiliate thereof.
(xxi) No representation or warranty of the Seller contained in this
Section 3, and no statement contained in any exhibit, schedule, certificate,
list, summary or other disclosure document provided or to be provided to Buyer
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact which is necessary in order to make
statements contained therein not misleading.
(xxii) Seller has not employed any investment banker, broker or finder
or incurred any liability for any brokerage fees, commissions or finder's fees
in connection with the transactions contemplated by this Agreement except that
Seller has retained, directly or indirectly, Equity Services, Ltd. ("ESL") and
Capital Solutions, Inc. ("CSI") ESL is entitled to receive a fee consisting of
an amount equal to seven percent (7%) of the aggregate purchase price of the
Shares, Five Thousand (5,000) shares of Series B Preferred Stock, reimbursement
of expenses and options to purchase shares of Common Stock. CSI is entitled to
receive a fee consisting of an amount equal to two percent (2%) of the aggregate
purchase price of the Shares and reimbursement of expenses.
4. INDEMNIFICATION BY SELLER.
Seller hereby agrees to indemnify and hold harmless Buyer and its
officers, directors, shareholders, employees, agents and attorneys against any
and all losses, claims, damages, liabilities and expenses incurred by each such
person in connection with defending or investigating any such claims or
liabilities, including any costs or expenses incurred, to which any such
indemnified party may become subject under the Securities' Act, or under any
other statute, at common law or otherwise, insofar as such losses, claims,
demands, liabilities and expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact made by the Company,
(ii) any omission or alleged omission of a material fact with respect to the
Company, or (iii) any breach of any representation, warranty or agreement made
by the Company in this Agreement.
5. CONDITIONS PRECEDENT TO CLOSING.
(i) Buyer shall (a) deliver payment of the Purchase Price to the
Escrow Agent; and (b) execute and deliver the Registration Rights Agreement.
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 5
<PAGE> 7
(ii) Seller shall (a) deliver to the Escrow Agent certificates for
the Series B Preferred Stock in the name of the Buyer, (b) execute and deliver
the Registration Rights Agreement and (c) deliver to Buyer an opinion from
Mackey, Price & Williams satisfactory to Equity Services, Ltd. and the Buyer, as
to the matters described in the Placement Agreement.
6. MISCELLANEOUS.
(i) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Nevada without giving effect to the
rules governing the conflicts of laws.
(ii) This Agreement may be executed by facsimile signature and in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(iii) Each of the parties agrees to pay its own expenses incident to
this Agreement and the performance of its obligations hereunder, including, but
not limited to, the fees and expenses of each such party's legal counsel.
(iv) All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or telecopied, initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 6.
if to Seller:
Venturi Technology Enterprises, Inc.
1327 N. State Street
Orem, Utah 84057
Attn: Gaylord Karren, President & CEO
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
with a copy (which shall not constitute notice) to:
Mackey, Price & Williams
900 First Interstate Plaza
170 South Main Street
Salt Lake City, Utah 84101-1655
Attn: Randy K Johnson, Esq.
Telephone: (801) 575-5000
Telecopier: (801) 575-5006
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 6
<PAGE> 8
if to Buyer:
Entrepreneurial Investors, Ltd.
Citibank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Robert E. Cordes, Director
Telephone: (242) 352-7063
Telecopier: (242) 352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: (214) 922-9221
Telecopier: (214) 969-7557
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; three (3) business days after
being deposited in the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited with a nationally
recognized, overnight courier service; when receipt is acknowledged, if
telecopied.
(v) This Agreement together with the Exhibits hereto constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior oral or written proposals or agreements relating thereto.
This Agreement may not be amended or any provision hereof waived in whole or in
part, except by a written amendment signed by both of the parties.
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 7
<PAGE> 9
IN WITNESS OF, this Agreement was duly executed on the date first
written above.
VENTURI TECHNOLOGY ENTERPRISES, INC.
By: /s/ Gaylord Karren
---------------------------------
GAYLORD KARREN, Chairman & CEO
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ Robert E. Cordes
---------------------------------
ROBERT E. CORDES, Director
INVESTOR SUBSCRIPTION AGREEMENT OF
VENTURI TECHNOLOGY ENTERPRISES, INC. Page 8
<PAGE> 1
Exhibit 10.38
VENTURI TECHNOLOGIES, INC.
1327 North State Street
Orem, UT 84057
SOLICITING DEALER AGREEMENT
August 9, 1996
Dominion Capital
5000 Quorum Drive, Suite 620
Dallas, TX 75240
Re: 10% Cumulative Convertible Series A Preferred Stock
To Whom it May Concern:
Relative to the offer and the sale (the "Offering") by you of the above
captioned securities (the "Securities"), we wish to confirm the terms and
conditions upon which the Offering will be made, the nature of the services that
you will render in connection with the Offering and our respective obligations
with respect to the Offering. In certain instances herein, you will be referred
to as "Dealer" and we will be referred to as the "Company."
1. APPOINTMENT
(a) Subject to the terms and conditions and on the basis of the
representations, warranties and covenants herein set forth, Dealer is hereby
authorized on a nonexclusive basis to effect sales of the Securities during the
period commencing with the date of the Private Offering Memorandum and ending at
the final Closing Date as defined in the Private Offering Memorandum. By your
confirmation thereof you hereby accept such appointment and agree to use your
best efforts to find purchasers for the Securities in accordance with the terms
and conditions of this Agreement. Dealer further agrees that it is bound by the
terms and conditions of the Escrow Agreement entered into by the Company and
Zions First National Bank for purposes of holding subscriber funds until the
minimum proceeds are raised for the Offering.
2. NATURE OF THE OFFERING
(a) Purchase Price. The Securities will be offered for sale at a
purchase price of $10.00 per share payable as shall be set forth in the Offering
Materials to be prepared pursuant to subparagraph 4(a) below.
(b) Registration of the Securities. The Securities will not be
registered under the Securities Act of 1933, as amended (the "1933 Act"), or
under the securities laws of any state, but will be offered and sold in reliance
on the exemption provided by Section 4(2) of the 1933 Act and the applicable
rules and regulations thereunder and on appropriate exemptions from the
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<PAGE> 2
registration requirements of the states in which it is mutually determined to
offer and sell the Securities.
(c) Subscription Agreements. Subscription Agreements, together with
checks payable to the Venturi Technologies Preferred Stock Account as set forth
in the Subscription Agreement, shall be sent to Venturi Technologies, Inc., 1327
North State Street, Orem, UT 84057 (the "Company") by the end of the next
business day following receipt by the Dealer.
(d) Acceptance by Company. Upon receipt of the Subscription Agreement,
the Company will determine promptly whether it wishes to accept the proposed
purchaser as a shareholder, it being understood that the Company reserves the
right to reject the tender of any Subscription Agreement. Deposit of a check
shall not constitute acceptance. Should the Company determine to reject the
tender, it will notify in writing the prospective purchaser and Dealer within
ten (10) business days following receipt by the Company of the Subscription
Agreement and the Company Escrow Agent will promptly return to the prospective
purchaser the tendered Subscription Agreement and a check equal to the amount
tendered for the shares.
3. COMPENSATION
As a compensation for the services rendered by Dealer in soliciting and
obtaining purchasers for the Securities, the Company shall pay the following:
(a) A cash commission in the amount of $0.80 per share (8% of each
share) plus a non accountable allowance for due diligence in the amount of $0.05
per share (0.5% of each share) will be paid to Dealers selling shares.
(b) In addition to the cash commission set forth above, Dealer shall be
granted warrants to purchase up to a total of 12,500 shares of Venturi common
stock upon the same terms and conditions as the warrants granted to purchasers
of Preferred Stock. The warrants (two of which can purchase one whole share of
common stock) shall be earned by Dealer as follows:
<TABLE>
<CAPTION>
Gross Proceeds Raised Number of Warrants
--------------------- ------------------
<S> <C>
$ 500,000--599,999 2,500
600,000--699,999 5,000
700,000--799,999 7,500
800,000--899,999 10,000
9000,000-999,999 12,500
1,000,000--1,099,999 17,500
1,100,000--1,199,999 20,000
1,200,000--1,299,999 22,500
1,300,000--1,500,000 25,000
</TABLE>
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(b) No Dealer shall be entitled to a selling commission with respect to
any tendered Subscription Agreement which is rejected by the Company or in any
case in which it is determined that the solicitation or obtaining of purchasers
by such Dealer was made in violation of the securities laws of the United states
or any state.
4. COVENANTS OF THE COMPANY
The Company hereby warrants, covenants and agrees as follows:
(a) Preparation of Offering Materials in Accordance With Applicable
Law. The Company shall provide a private offering memorandum and certain other
documents to be used in connection with the offering and sale of the securities
(the "Offering Materials") prepared in conformity with the requirements of
Section 4(2) of the 1933 Act and the applicable rules and regulations thereunder
as well as the provisions of the securities or blue sky laws of all applicable
jurisdictions.
(b) Amendments to Offering Materials as Required. The Company shall
promptly advise Dealer if the Company becomes aware of any event which happens
prior to the Final Closing Date which makes any statement in the Offering
Materials untrue or misleading in any material respect or which requires any
change in the Offering Materials in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. Without
limiting the foregoing, if, prior to the Final Closing Date, any event shall
occur which, in the judgment of the Company or Dealer or their respective
counsel, should be set forth in the Offering Materials in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, or if it is necessary to amend or supplement the Offering
Materials to comply with law, the Company shall forthwith prepare an appropriate
amendment or supplement thereto.
(c) Copies of Offering Materials to be Provided to Dealer. Until the
Final Closing Date, the Company shall deliver to Dealer without charge as many
copies of the Offering Materials (and of any amendments and supplements thereto)
as dealer may reasonably request.
(d) Requests for Amendment or Issuance of Stop Orders. Int he event the
Company is advised or obtains knowledge thereof, it shall advise Dealer of (i)
any request made by the Securities and exchange Commission or any state
securities agency for an amendment of or supplement to the Offering Materials or
for additional information, or (ii) the issuance by the Securities and Exchange
Commission or any state securities agency of any stop order preventing
proceedings for that purpose. Without limiting the foregoing, the company shall
use its best efforts to prevent the issuance of any such order and, if any such
order is issued, to obtain the lifting thereof as promptly as possible.
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(e) Qualification of the Securities Under State Law. The Company shall
(i) qualify the Securities for offer and sale under the securities or blue sky
laws of such jurisdictions in which the Company and Dealer mutually determine to
offer and sell the Securities and (ii) make such applications, file such
documents and furnish such information as may reasonably be required for that
purpose.
(f) Payment of Expenses by the Company. The Company shall pay all costs
and expenses incurred in connection with the Offering (other than the fees and
expenses of counsel to Dealer or expenses incurred by Dealer on its own behalf)
including but not limited to all accounting, legal, printing and other costs in
respect of (i) the preparation of the Offering Materials and the exhibits
thereto prepared in connection with the Offering, as amended or supplemented
from time to time, and (ii) the compliance with the securities or blue sky laws
of those jurisdictions in which the Securities are to be sold.
(g) Representations and Warranties. The Company represents and warrants
as of the date hereof and as of the final Closing Date to the effect that:
(i) Status and Authority. Prior to the initial closing date,
the Company will be a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas, with full power
and authority to conduct its business as being conducted, and to the
extent appropriate as it is to be conducted, as described int he
Offering Materials.
(ii) Status of Securities. When issued the shares shall be
duly authorized and issued shares and shall be fully paid and
nonassessable.
(iii) Authorization. This Agreement has been duly authorized,
executed and delivered by the Company.
(iv) Offering Materials True and Correct. The Offering
Materials and each amendment and supplement thereto conform in all
material respects with the requirements of the 1933 Act and the
applicable rules land regulations thereunder and the provisions of the
securities or blue sky laws of all applicable jurisdictions. None of
the Offering Materials and any amendments or supplements thereto
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
are made, not misleading.
(v) Absence of Stop Orders. Neither the Securities and
exchange Commission nor any state securities agency as (A) made any
requests for an amendment of or supplement to the Offering Materials or
for additional information or (B) issued any other preventing or
suspending the Offering or the use of the Offering Materials or
instituted proceedings for that purpose.
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(vi) Absence of Material Adverse Change. Since the date of the
Private Offering Memorandum no event has occurred, including any
material adverse change in the financial condition of the Company the
incurring of any material liability or obligation, direct or
contingent, the entering into of any material transaction, or the
institution of any legal or administrative proceeding against the
Company which would have a material adverse effect upon the Company.
(vii) Actions Affecting Securities Compliance. The Company has
not taken any action which adversely affects the availability of the
exemption from registration under the 1933 Act provided by Section 4(2)
thereof or the applicable rules and regulations thereunder or any
provisions of the securities or blue sky laws of any applicable
jurisdiction.
(viii) Litigation. There are no actions, suits, proceedings or
other litigation pending or, to the knowledge of the Company threatened
against or affecting the Company at law or in equity or before or by
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which. if
determined adversely to the Company would individually or in the
aggregate have a materially adverse effect on the business, assets,
properties operation or prospects of the Company or on its condition,
financial, or otherwise.
(ix) Compliance With Law and Other Regulations. The Company is
not subject to and has not been threatened with any material fine,
penalty or disability as the result of its failure to comply with any
requirements of federal, state, local or foreign law or regulation or
any requirements of any governmental body or agency having jurisdiction
over it, the conduct of its business, the use of its assets and
properties, or any premises occupied by it.
(x) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate or other information furnished by the
Company to Dealer in connection with this Agreement or any of the
transactions contemplated hereby contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
in which they are made not misleading.
(xi) Survival of Representation. At all times subsequent to
the date of this Agreement and up to and including the Final Closing
Date, the representations and warranties made in this paragraph 4 will
be true and correct with the same effect as if they had been made on
and as of such date.
5. COVENANTS OF DEALER
Dealer hereby warrants, covenants and agrees as follows:
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(a) Best Efforts. Dealer shall use its best efforts to find purchasers
for the Securities who are acceptable to the Company.
(b) Manner of the Offering. Dealer shall use its best efforts to offer
and sell the Securities on behalf of the Company in accordance with the
provisions of and applicable rules, regulations and published administrative
interpretations under Section 4(2) of the 1933 Act and the provisions of the
securities or blue sky laws of any jurisdictions in which the company and Dealer
mutually determine to offer and sell the Securities. Dealer shall comply with
all the following:
(i) Dealer agrees to offer the Securities only to accredited
investors as defined in Regulation D promulgated under the Securities
Act of 1933, and only to investors in those states in which the Company
has authorized it to make offers and sales and in which Dealer is
qualified to make offers and sales of the Shares.
(ii) Dealer shall use reasonable efforts to select investors
it reasonably believes meet the investor suitability requirements set
forth in the Subscription agreement, which is an exhibit to the
Offering Materials, and such additional requirements as are specified
in the Subscription Agreement.
(iii) Dealer shall maintain a list of the persons to whom
Securities are offered and sold and such other records as may be
necessary to document Dealer's compliance with restrictions on
solicitation.
(iv) Dealer shall not give any information or make any
representation in connection with the Offering other than those
contained in the Offering Materials provided by the Company for use in
connection with the Offering.
(v) Dealer shall not publish, circulate or otherwise use any
other solicitation material without the prior written approval of the
Company.
(vi) Dealer shall accept subscriptions only from investors who
have received a copy of the Offering Materials, including any required
supplements, and who have executed a Subscription Agreement.
(vii) Dealer shall not purchase any Shares for resale.
(viii) Dealer agrees to affix copies of any supplements to the
Offering Materials upon receipt. dealer shall return to the Company any
and all unused copies of the Offering Materials supplied by the Company
to Dealer in connection with the Offering.
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(ix) Dealer shall supply copies of pertinent documents and
otherwise cooperate with the Company in complying with requests or
inquiries of any regulatory authorities relating to the Offering.
(x) Dealer is not authorized to act as an agent of the
Company, and Dealer agrees not to act as such agent and not to purport
to do so without the prior written approval of the Company.
(xi) Dealer shall not re-allow commissions to any other
broker/dealer.
(c) Representations and Warranties. Dealer represents and warrants as
of the date hereof and as of the Final Closing date to the effect that:
(i) Status and Authority. Dealer is a corporation duly
organized and validly existing under the laws of the state of its
incorporation and is in good standing under the laws of such state and
in each other state in which the Offering is made by Dealer.
(ii) Authorization. This Agreement has been duly authorized,
executed and delivered by Dealer.
(iii) Registration as Broker/Dealer. Dealer is a member of the
National Association of Securities Dealers, Inc. and is registered or
exempt from registration as a broker/dealer under the Securities
Exchange act of 1934 and the securities or blue sky laws of each
jurisdiction in which the Offering is made by Dealer.
(d) Survival of Representations. At all times subsequent to the date of
this Agreement and up to and including the Final Closing Date, the
representations and warranties made in this paragraph 5 will be true and correct
with the same effect as if they had been made on and as of such time.
6. INDEMNIFICATION
(a) Indemnity by Dealer. Dealer hereby indemnities and holds harmless
the Company and each person who controls the Company (within the meaning of
Section 15 of 1933 Act) against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs and investigation and counsel fees)
arising out of or based upon:
(i) any breach by Dealer of the representations, warranties or
covenants by it contained in or made pursuant to this Agreement;
(ii) the failure by Dealer to give, deliver or send a copy of
the Offering Materials as appropriate to any person to whom the
Securities are offered or sold
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or to offer or sell the Securities in accordance with the provisions of
an applicable rules, regulations and published administrative
interpretations under Section 4(2) of the 1933 Act and the securities
or blue sky laws of any jurisdiction in which the Securities are
offered or sold by or through Dealer, including any solicitation by
Dealer of any subscription other than in accordance with the terms of
this Agreement and the Offering Materials, any representation made by
dealer other than as set forth in the Offering Materials furnished by
the Company specifically for use in connection with the Offering or any
other misleading statement by specifically for use in connection with
the Offering or any other misleading statement by Dealer or failure by
dealer to correct a misleading statement by Dealer in order to make
such statement conform to the information contained in the Offering
Materials. This indemnity agreement shall be in addition to any
liability which Dealer may otherwise have.
(b) Indemnity by the Company. The Company hereby indemnifies and holds
harmless Dealer and each person who controls Dealer (within the meaning of
Section 15 of the 1993 Act) against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
counsel fees) arising out of or based upon:
(i) any breach by the Company of the representations,
warranties or covenants by it contained in or made pursuant to this
Agreement;
(ii) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Materials or in any amendment
or supplement thereto or in any blue sky application or document,
except for information relating to Dealer furnished in writing by
Dealer, or on its behalf, expressly for use in connection with the
Offering Materials or in any amendment or supplement thereto or in any
blue sky application or document; or
(iii) any omission or alleged omission to state in the
Offering Materials any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading, excepting information
relating directly or indirectly to Dealer; provided, however, that the
Company shall not be responsible for, no does the Company indemnify or
hold harmless Dealer or its controlling persons against, any losses,
claims, damages, liabilities or expenses arising out of or resulting
from the offer or sale of the Securities to any person who was not
given, delivered or sent a copy of the Offering Materials as
appropriate, or the failure by dealer to offer and sell the Securities
in accordance with the provisions of and applicable rules, regulations
and published administrative interpretations under Section 4(2) of the
1933 Act and rules thereunder and the securities or blue sky laws of
any jurisdiction in which the Securities are offered or sold by or
through Dealer. This indemnity will be in addition to any liability
which the may otherwise have.
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(c) Actions Relating to Indemnity. If any action or claim shall be
brought or asserted against party entitled to indemnification hereunder (the
"Indemnified Party") or any person controlling such party and in respect of
which indemnity may be sought from the party obligated to indemnify the
Indemnified Party pursuant to paragraphs 7(a) and (b) hereof (the "Indemnifying
Party"), the Indemnified Party shall promptly notify the Indemnifying Party in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel and the payment of all expenses. The Indemnified Party
or any such controlling person shall have the right to employ separate counsel
in any such action and participate in the defense thereof and to be indemnified
for the reasonable fees and expenses thereof. This paragraph shall survive any
termination of this Agreement.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
(a) Obligation of Dealer. The obligations of Dealer hereunder shall be
subject to the following conditions precedent, any one or more of which may be
waived by Dealer:
(i) Performance of Obligations. The Company shall have
performed all of its covenants and agreements as set forth herein on or
prior to the Final Closing Date.
(ii) Absence of Material Adverse Change. There shall not have
been a material adverse change between the date hereof and the final
Closing Date in the business, properties, assets, financial condition,
results of operations or prospects of the Company.
(b) Obligations of the Company. Except for the obligation of the
Company to pay the costs and expenses of the Offering as provided above, the
obligations of the Company hereunder shall be subject to the following condition
precedent, which may be waived by the Company:
(i) Performance of Obligations. Dealer shall have performed
all of its covenants and agreements as set forth herein on or prior to
the final Closing Date.
8. GENERAL
(a) Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the laws of the State of Texas notwithstanding any
conflict of law provisions to the contrary.
(b) Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against receipt
or when deposited in the United States mails, first class postage prepaid,
addressed as set forth below:
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If to Dealer: Dominion Capital
5000 Quorum Drive, Suite 620
Dallas, TX 75240
If to Company: Venturi Technologies, Inc.
1327 North State Street
Orem, UT 84057
With a copy to: Randy K. Johnson
Fabian & Clendenin
215 So. State Street, Twelfth floor
Salt Lake City, Utah 84111
(c) Binding, Nature of Agreement: No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that neither party may assign or
transfer its rights or obligations under this Agreement without the prior
written consent of the other party hereto.
(d) Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
(e) Paragraph Headings. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
(f) Gender. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.
If the foregoing accurately sets forth the basis of our understanding,
please sign and return to the undersigned the extra copy of this letter, which
will thereupon constitute a contract between us.
VENTURI TECHNOLOGIES, INC.,
a Texas corporation
By:_______________________________
Its:
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AGREED AND ACCEPTED:
DOMINION CAPITAL
By:_______________________________
Its:
Date:_____________________________
<PAGE> 1
EXHIBIT 10.39
AGREEMENT
AND
PLAN OF REORGANIZATION
OF
VENTURI TECHNOLOGIES, INC.
a Texas Corporation
AND
HITEK CARPET CARE, INC.
a Nevada Corporation
This Agreement and Plan of Reorganization (this "Agreement") is made as
of the 15th day of May, 1997, by and among Venturi Technologies, Inc., a Texas
corporation ("Venturi"), and HiTek Carpet Care, Inc., a Nevada corporation
("HiTek"), for the purpose of effecting an acquisition of all of the outstanding
common and preferred stock of Venturi by HiTek in exchange for common and
preferred stock of HiTek (the "Reorganization").
The boards of directors of Venturi and HiTek deem it advisable and in
the best interests of each such corporation and their respective shareholders to
cause the merger of Venturi with and into HiTek on the terms and subject to the
conditions set forth in this Agreement.
The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
The parties, intending to be legally bound, agree as follows:
1. Identity of Shareholders. The holders of common stock of
Venturi are listed on Exhibit "A" attached hereto (the "Common
Shareholders"), the holders of Series A Preferred Stock of
Venturi are listed on Exhibit "B" attached hereto (the
"Preferred Shareholders"), and the holders of common stock of
HiTek are listed on Exhibit "C" hereto (the "HiTek Common
Shareholders"). There are not presently any shares of
preferred stock authorized or outstanding in HiTek.
2. Adoption of Plan. This Plan shall be submitted for adoption
either at special meetings of the Board of Directors and
shareholders of Venturi and HiTek called for that purpose, or
pursuant to written consent of the directors and shareholders.
This Plan shall be effective and shall be deemed to have been
adopted only upon its approval by the directors and
shareholders of Venturi and HiTek.
3. The Merger. Upon the terms and subject to the conditions set
forth herein, Venturi shall be merged with and into HiTek and
the separate existence of Venturi shall thereupon cease, and
HiTek, as the surviving corporation, shall
<PAGE> 2
continue to exist under and be governed by Nevada law.
4. Procedure. The Merger/Reorganization will take place in two
discrete steps: (a) all of the common stock outstanding in
Venturi will be exchanged for HiTek common stock, and (b) all
of the Series A Preferred Stock outstanding in Venturi will be
exchanged for Similar Series A Preferred Stock to be created
in HiTek.
(A) In the first step in the reorganization,
common shareholders of Venturi shall sign a
Stock for Stock Agreement in the form
attached hereto as Exhibit "D," and shall
surrender their shares in Venturi to HiTek
in exchange for shares in HiTek. For each
one share of Venturi common stock owned on
the record date, a shareholder will receive
1.093585771 shares of HiTek common stock.
(B) The second step in the Reorganization shall
be accomplished as follows:
(i) HiTek shall cause its Articles of
Incorporation to be amended, or
shall file with the Secretary of
State of Nevada a designation of
preferences, creating a series of
preferred stock that is identical to
the Series A 10% Cumulative
Convertible Preferred Stock
outstanding in Venturi with the
following exceptions:
(a) The Series A
preferred stock
created in HiTek
shall be entitled
to one vote for
each one share of
such Series A
Preferred Stock;
and
(b) The Series A
Preferred Stock
shall be
convertible to
shares of common
stock of HiTek at
a ratio of
1.093585771 shares
of common stock
for each one share
of Series A
Preferred Stock.
(ii) Holders of Series A Preferred Stock
will then exchange their shares of
Series A Preferred Stock in Venturi
for the newly authorized Series A
Preferred Stock in HiTek on a 1 for
1 basis.
(iii) HiTek shall change its name to
"Venturi Technologies Enterprises,
Inc." and at some point in time
within one
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(1) year after the execution of the
Stock for Stock Agreement Venturi
shall dissolve.
5. Supplementary Action. The parties each agree to execute and
deliver any and all documents and things necessary or proper
to accomplish the Reorganization, and to otherwise carry out
the purposes and provisions of this Agreement.
6. Options and Warrants. Upon completion of the Reorganization,
all options or warrants to purchase Venturi common stock then
outstanding, whether or not such options or warrants have been
memorialized by a written document or agreement, shall be
terminated. HiTek covenants and agrees that it shall promptly
upon completion of the Reorganization grant replacement stock
options and warrants to current holders of such Venturi stock
options and warrants.
7. No Further Transfers. Upon the completion of the
Reorganization, the stock transfer books of Venturi shall be
closed and no further transfer of shares shall thereafter be
made.
8. Representations and Warranties of Venturi and HiTek. Venturi
and HiTek hereby, jointly and severally, represent and warrant
to each other as follows:
(A) Organization. Venturi and HiTek are both corporations
duly incorporated, validly existing, and in good
standing under the laws of their respective states of
incorporation.
(B) No Conflict. Neither the execution and delivery of
this Agreement nor the performance of the
transactions contemplated herein by Venturi or HiTek
will violate, conflict or constitute a default under
any lease, contract, agreement, license or other
instrument or any order, judgment or ruling of any
governmental authority to which Venturi or HiTek are
a party.
(C) Authority. The execution and delivery of this
Agreement by the Venturi and HiTek have been duly and
validly authorized by all necessary action of the
board of directors of Venturi and HiTek,
respectively.
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IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Reorganization as of the date first written above.
VENTURI TECHNOLOGIES, INC.,
A Texas corporation
By: /s/ Gaylord Karren
--------------------------------
Its:Chairman & CEO
------------------------------
HITEK CARPET CARE, INC.,
A Nevada corporation
By:/s/ [illegible signature]
--------------------------------
Its:President
-----------------------------
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<PAGE> 1
Exhibit 10.40
STOCK-FOR-STOCK-AGREEMENT
REORGANIZATION AGREEMENT between HiTek Carpet Care, Inc., a Nevada
corporation (hereinafter referred to as "HiTek"), and shareholders of Venturi
Technologies, Inc., a Texas corporation (hereinafter referred to as "Venturi").
For the Acquisition by HiTek of all the outstanding common stock of
Venturi, in exchange for stock of HiTek.
AGREEMENT, dated as of this 9th day of June, 1997, between HiTek and
all of the common stock Shareholders of Venturi (hereinafter collectively
referred to as the "Common Stock Venturi Shareholders").
WHEREAS, the Common Stock Venturi Shareholders own 2,547,321 shares of
common stock, no par value per share, of Venturi and which constitutes all of
the outstanding common stock of Venturi, for a total of 2,547,321 issued and
outstanding shares of common stock of Venturi.
WHEREAS, certain Venturi shareholders (SCHEDULE IV) own 64,410 shares
of preferred stock, no par value per share, of Venturi (the "Preferred Stock
Venturi Shareholders"), which is designated "10% Cumulative Convertible Series A
Preferred Stock" and which constitutes all of the outstanding preferred stock of
Venturi, for a total of 64,410 issued and outstanding shares of preferred stock
designated 10% Cumulative Convertible Series A Preferred Stock of Venturi.
WHEREAS, certain individuals or shareholders of Venturi own warrants to
purchase 202,743 shares of common stock, no par value per share, of Venturi (the
"Venturi Warrantholders"), and which constitutes all of the outstanding warrants
to purchase common stock of Venturi, for issued and outstanding warrants to
purchase a total of 202,743 shares of common stock of Venturi. Said warrants are
as follows:
<TABLE>
<CAPTION>
Name of Exercise Number of Shares
Warrant Holder Expiration Price to Purchase
-------------- ---------- ----- -----------
<S> <C> <C> <C>
William Davidson 2001 2.00 50,000
Sentry Financial Corp. 6/18/06 1.00 83,333
Series A Preferred Stock
investors 2002 5.00 64,410
Dominion Capital Corp. 2002 5.00 5,000
</TABLE>
WHEREAS, the Common Stock Venturi Shareholders own and have the right
to sell, transfer and exchange all of the shares for the purchase of the capital
stock of HiTek. HiTek hereby offers 2,785,714 shares of its common stock to the
Common Stock Venturi Shareholders for all of the
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outstanding common stock of Venturi. The Common Stock Venturi Shareholders wish
to make said exchange.
WHEREAS, the parties hereto intend that the securities exchange
described herein between HiTek and the Common Stock Venturi Shareholders will be
tax free in accordance with the provisions of Section 368(a)(1)(B) of the
Internal Revenue Code.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto have agreed and by these
present do hereby agree as follows:
1. Exchange of Securities. Subject to the terms and conditions
hereinafter set forth, at the time of the closing referred to in Section 6
hereof (the "Closing Date"), HiTek will issue and deliver, or cause to be issued
and delivered to the Common Stock Venturi Shareholders, in exchange for all of
the issued and outstanding shares of common stock of Venturi, 2,785,714 shares
of its common stock. The shares of HiTek will be allocated to the Common Stock
Venturi Shareholders as set forth in SCHEDULE I, attached hereto. Further, upon
conversion of the 10% Cumulative Convertible Series A Preferred Stock into
common stock of Venturi by Preferred Stock Venturi Shareholders, HiTek will
issue and deliver or cause to be issued and delivered to the Preferred Stock
Venturi Shareholders, 1.093585771 share of HiTek common stock for each one share
of Venturi common stock. Fractions, if any, will be rounded up. Upon the
exercise of the warrants to purchase common stock of Venturi by the Venturi
Warrantholders, HiTek will issue and deliver or cause to be issued and delivered
to the Venturi Warrantholders, 1.093585771 share of HiTek common stock for each
one share of Venturi common stock. Fractions, if any, will be rounded up.
2. Representations and Warranties by Venturi and Common Stock Venturi
Shareholders. Venturi and Common Stock Venturi Shareholders each represent and
warrant to HiTek, all of which representations and warranties shall be true at
the time of closing, and shall survive the closing for a period of six (6)
months from the date of closing, except as to the warranties and representations
set forth in subsection (i) herein, which shall survive for a period of three
(3) years from the date of closing, and those set forth in subsection (l)
herein, which shall survive for a period of six (6) months from the date of
closing, or from the date when the accounts receivable may become due and
payable, whichever shall occur later, that:
(a) Venturi is a corporation duly organized and validly
existing and in good standing under the laws of the State of Texas and
has the corporate powers to own its property and carry on its business
as and where it is now being conducted. Copies of the Certificate of
Incorporation and the By-Laws of Venturi, which have heretofore been
furnished by Venturi to HiTek, are true and correct copies of said
Certificate of Incorporation and By-Laws including all amendments to
the date hereof.
(b) The authorized capital stock of Venturi consists of
20,000,000 shares of common stock, no par value ("Common Stock of
Venturi"), of which 2,547,321 shares have
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<PAGE> 3
been validly issued and are now outstanding and 5,000,000 shares of
preferred stock, no par value, of which 64,410 shares have been validly
issued and are now outstanding.
(c) Common Stock Venturi Shareholders have full power to
exchange the shares to purchase the capital stock of HiTek on behalf of
themselves upon the terms provided for in this Agreement, and said
shares have been duly and validly issued and are free and clear of any
lien or other encumbrance.
(d) From the date hereof, and until the date of closing, no
dividends or distributions of capital, surplus, or profits shall be
paid or declared by Venturi in redemption of their outstanding shares
or otherwise, and except as described herein no additional shares shall
be issued by said corporation.
(e) Since the date hereof, Venturi has not engaged in any
transaction other than transactions in the normal course of the
operations of their business, except as specifically authorized by
HiTek in writing.
(f) Venturi is not involved in any pending or threatened
litigation which would materially affect its financial condition
disclosed to HiTek in writing.
(g) Venturi has and will have on the Closing Date, good and
marketable title to all of its property and assets shown on SCHEDULE II
attached hereto, free and clear of any and all liens or encumbrances or
restrictions, except as shown on SCHEDULE II, attached hereto and
except for taxes and assessments due and payable after the Closing Date
and easements or minor restrictions with respect to its property which
do not materially affect the present use of such property.
(h) (1) The inventories of Venturi as reflected in SCHEDULE
II, furnished by Venturi to HiTek prior to the execution hereof, are
valued at book value.
(2) The inventory of Venturi listed on the schedule
referred to in (I)(1) above is hereinafter collectively referred to as
the "Inventory." The Inventory is in good and usable condition.
(i) As of the date hereof, there are no accounts receivable of
Venturi of a material nature, except for those accounts receivable set
forth in SCHEDULE II, attached hereto.
(j) Venturi does not now have, nor will it have on the Closing
Date, any long-term contracts ("long-term" being defined as more than
one year) except those set forth in SCHEDULE II attached hereto.
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<PAGE> 4
(k) Venturi does not now have, nor will it have on the Closing
Date any pension plan, profit-sharing plan, or stock purchase plan for
any of its employees except those set forth in SCHEDULE II, attached
hereto and certain options to proposed executive officers.
(1) Venturi does not now have, nor will it have on the Closing
Date, any known liabilities or contingent liabilities other than those
disclosed in their unaudited financial statements dated December 31,
1996 attached hereto as SCHEDULE III except in the ordinary course of
business or in connection with its proposed private offering.
3. Representations and Warranties by HiTek. HiTek represents and
warrants to the Common Stock Venturi Shareholders, all of which representations
and warranties shall be true at the time of closing, and shall survive the
closing for a period of six (6) months from the date of closing, as follows:
(a) HiTek is a corporation duly organized and validly existing
and in good standing under the laws of the State of Nevada and has the
corporate power to own its properties and carry on its business as now
being conducted and has authorized capital stock consisting of
20,000,000 shares of common stock, $.001 par value per share, of which
there are 1,500,000 shares presently outstanding and 5,000,000 shares
of preferred stock, $.001 par value per share, of which there are no
shares outstanding.
(b) HiTek has the corporate power to execute and perform this
Agreement, and to deliver the stock required to be delivered to Common
Stock Venturi Shareholders hereunder.
(c) The execution and delivery of this Agreement, and the
issuance of the stock required to be delivered hereunder have been duly
authorized by all necessary corporate actions, and neither the
execution nor delivery of this Agreement, nor the issuance of the
stock, nor the performance, observance or compliance with the terms and
provisions of this Agreement will violate any provision of law, any
order of any court or other governmental agency, the Certificate of
Incorporation or By-Laws of HiTek or any indenture, agreement or other
instrument to which HiTek is a party, or by which HiTek is bound, or by
which any of its property is bound.
(d) The shares of Common Stock of HiTek deliverable pursuant
hereto will on delivery in accordance with the terms hereof, be duly
authorized, validly issued, and fully paid, and non-assessable.
(e) To the best of HiTek's knowledge, neither HiTek, nor any
of its officers or directors have, during the past five (5) years, been
the subject of any injunction, cease and desist order, assurance of
discontinuance, suspension or restraining order, revocation or
suspension of a license to practice a trade, occupation or profession,
denial of an application to obtain or renew same, any stipulation or
consent to desist from any act or practice, any
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<PAGE> 5
disciplinary action by any court or administrative agency, nor, to the
best of HiTek's knowledge, has HiTek or any of its officers or
directors knowingly violated any state or federal laws regulating the
offering and sale of securities.
4. Conditions to the Obligations of HiTek. The obligations of HiTek
hereunder shall be subject to the conditions that:
(a) HiTek shall not have discovered any material error or
misstatement in any of the representations and warranties by the Common
Stock Venturi Shareholders herein, and all the terms and conditions of
this Agreement to be performed and complied with shall have been
performed and complied with.
(b) There shall have been no substantial adverse changes in
the conditions, financial, business otherwise of Venturi from the date
of this Agreement, and until the date of closing, except for changes
resulting from those operations in the usual and ordinary course of
business, and between such dates the business and assets of Venturi
shall not have been materially adversely affected as the result of any
fire, explosion, earthquake, flood, accident, strike, lockout,
combination of workmen, taking over of any such assets by any
governmental authorities, riot, activities of armed forces, or acts of
God or of the public enemies.
(c) HiTek shall upon request and at the time of closing,
receive an opinion of counsel to the effect that: (1) Venturi is duly
organized and validly existing under the laws of the State of Texas and
has the power and authority to own its properties and to carry on its
respective business wherever the same shall be located and operated as
of the Closing Date; and, (2) this Agreement has been duly executed and
delivered by Common Stock Venturi Shareholders and constitutes a legal,
valid and binding obligation of the Common Stock Venturi Shareholders
enforceable in accordance with its terms.
(d) Venturi does not now have, nor will it have on the date of
closing, any known or unknown liabilities or contingent liabilities,
except as specifically set forth on SCHEDULE II, attached hereto.
5. Conditions to the Obligations of Common Stock Venturi Shareholders.
The obligations of the Common Stock Venturi Shareholders hereunder are subject
to the conditions that:
(a) Common Stock Venturi Shareholders shall not have
discovered any material error or misstatement in any of the
representations and warranties made by HiTek herein and all the terms
and conditions of this Agreement to be performed and complied with by
HiTek shall have been performed and complied with.
(b) The Common Stock Venturi Shareholders shall upon request,
at the time of closing, receive an opinion of counsel to the effect
that: (1) HiTek is a corporation duly
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<PAGE> 6
organized and validly existing under the laws of the State of Nevada,
and has the power to own and operate its properties wherever the same
shall be located as of the Closing Date; (2) the execution, delivery
and performance of this Agreement by HiTek has been duly authorized by
all necessary corporate action and constitutes a legal, valid and
binding obligation of HiTek, enforceable in accordance with its terms;
(3) the securities to be delivered to Common Stock Venturi Shareholders
pursuant to the terms of this Agreement will have been validly issued,
fully paid and non-assessable; (4) the exchange of the securities
herein contemplated does not require the registration of the HiTek
securities pursuant to any Federal law dealing with the issuance, sale,
transfer, and/or exchange of corporate securities; (5) that HiTek is
not under investigation by the SEC, the NASD or any state securities
commission; (6) that there are no known securities violations; (7) all
shares issued by HiTek have been validly issued in accordance with
Nevada or Federal law, are fully paid and non-assessable; and (8) there
are no outstanding options, rights, warrants, conversion privileges or
other agreements which would require issuance of additional shares.
6. Closing Date. The closing shall take place on or before June 27,
1997, or as soon thereafter as is practicable, at the Law Offices of Max C.
Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada 89121, or at such
other time and place as the parties hereto shall agree upon.
7. Actions at the Closing. At the closing, HiTek and Common Stock
Venturi Shareholders will each deliver, or cause to be delivered to the other,
the securities to be exchanged in accordance with Section I of this Agreement
and each party shall pay any and all Federal and State taxes required to be paid
in connection with the issuance and the delivery of their own securities. All
stock certificates shall be in the name of the party to which the same are
deliverable.
8. Conduct of Business, Board of Directors, etc. Between the date
hereof and the Closing Date, Venturi will conduct its business in the same
manner in which it has heretofore been conducted and the Common Stock Venturi
Shareholders will not permit Venturi to: (1) enter into any contract, etc.,
other than in the ordinary course of business; or (2) declare or make any
distribution of any kind to the stockholders of Venturi, without first obtaining
the written consent of HiTek.
Upon closing, the old officers and members of the board of directors of
HiTek will tender their resignations and a new Board of Directors will be
elected by the shareholders of HiTek, which shall consist of the following
individuals.
Gaylord Karren
John Hopkins
Upon election of the above Board of Directors, and subject to the
authority of the Board of Directors as provided by law and the By-Laws of HiTek,
the new officers of HiTek, after the closing date of this Agreement shall be as
follows:
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<PAGE> 7
Gaylord Karren Chairman of the Board and Chief Executive Officer
John Hopkins President
Merril Littlewood Chief Financial Officer and Treasurer
Randy Johnson Secretary
9. Access to the Properties and Books of Venturi. The Common Stock
Venturi Shareholders hereby grant to HiTek, through their duly authorized
representatives and during normal business hours between the date hereof and the
Closing Date, the right of full and complete access to the properties of Venturi
and full opportunity to examine their books and records.
10. Miscellaneous.
(a) This Agreement shall be controlled, construed and enforced
in accordance with the laws of the State of Nevada.
(b) Each of the Constituent Corporations shall bear and pay
all costs and expenses incurred by it or on its behalf in connection
with the consummation of this Agreement, including, without limiting
the generality of the foregoing, fees and expenses of financial
consultants, accountants and counsel and the cost of any documentary
stamps, sales and excise taxes which may be imposed upon or be payable
in respect to the transaction.
(c) At any time before or after the approval and adoption by
the respective stockholders of the Constituent Corporations, if
required, this Reorganization Agreement may be amended or supplemented
by additional written agreements, as may be determined in the judgment
of the respective Boards of Directors of the Constituent Corporations
to be necessary, desirable or expedient to further the purpose of this
Reorganization Agreement, to clarify the intention of the parties, to
add to or to modify the covenants, terms or conditions contained
herein, or otherwise to effectuate or facilitate the consummation of
the transaction contemplated hereby. Any written agreement referred to
in this paragraph shall be validly and sufficiently authorized for the
purposes of this Reorganization Agreement if signed on behalf of
Venturi or HiTek, as the case may be, by its Chairman of the Board, or
its President.
(d) This Reorganization Agreement may be executed in any
number of counterparts and each counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall
constitute but one Reorganization Agreement.
(e) This Agreement shall be binding upon and shall inure to
the benefit of the heirs, executors, administrators and assigns of the
Common Stock Venturi Shareholders and upon the successors and assigns
of HiTek.
(f) All notices, requests, instructions, or other documents to
be given hereunder shall be in writing and sent by registered mail:
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If to Common Stock
Venturi Shareholders, then: 1327 North State
Orem, UT 84057
If to HiTek, then: The Law Offices of Max C. Tanner
2950 E. Flamingo, Suite G
Las Vegas, NV 89121
The foregoing Reorganization Agreement, having been duly approved or
adopted by the Board of Directors, and duly approved or adopted by the
stockholders of the constituent corporation, as required, in the manner provided
by the laws of the State of Nevada, the Chairman of the Board, President or the
Secretary of said corporations, and the Common Stock Venturi Shareholders do now
execute this Reorganization Agreement under the respective seals of said
corporation by the authority of the directors and stockholders of each, as
required, as the act, deed and agreement of each of said corporations. This
Stock-For-Stock Agreement may be signed in two or more counterparts.
HITEK CARPET CARE, INC.
By:
Darren Dixon, President
VENTURI TECHNOLOGIES, INC,
By: /s/ Gaylord Karren
Gaylord Karren, Chairman of the Board
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<PAGE> 1
Exhibit 10.41
PROMISSORY NOTE
$100,000 DATED: March ___, 1997
FOR VALUE RECEIVED, Venturi Technologies, Inc., a Texas corporation,
hereby promises to pay to HiTek Carpet Care, Inc., a Nevada corporation, or its
order, One Hundred Thousand Dollars ($100,000) plus interest at the rate of Ten
Percent (10%) per annum. All principal and interest accruing under this Note
shall be due and payable on or before May 31, 1997.
Prepayment may be made without penalty. Presentment for payment, notice
of dishonor, protest and notice of protest are hereby waived. Repayment of this
Promissory Note shall be secured by the terms of the Agreement of Collateral,
attached hereto as "Exhibit A."
In any action or proceeding brought by the holder hereof to recover any
part or all of the principal sum and/or interest thereunder, there shall be
included as an item of damages which the holder hereof shall be entitled to
recover, a reasonable attorney's fee incurred by reason of such action or
proceeding.
VENTURI TECHNOLOGIES, INC.
By:
Its:
<PAGE> 1
Exhibit 10.42
CDL CAPITAL CORP.
5725 North Scottsdale Road, Suite 190
Scottsdale, Arizona 85250
March 10, 1998
Gaylord Karren, Chairman and CEO
Venturi Technology Enterprises, Inc.
1327 North State
Orem, Utah 84057
Re: Business and Financial Advisory Agreement
Dear Gaylord:
The purpose of this letter agreement (the "Agreement") is to confirm
and set forth the terms and conditions of the engagement of CDL Capital Corp., a
Nevada corporation (the "Advisor") by Venturi Technology Enterprises, Inc., a
Nevada company (the "Company"), to render business and financial advisory
services to the Company for the purpose of assisting the Company's growth and
development and, where indicated, to raise funds to facilitate the achievement
of its business objectives.
The Company desires to develop business and marketing plans, financial
models, and funding strategies and to secure appropriate financing for its
business and has requested that Advisor assist it in structuring, preparing and
carrying out appropriate financing activities, which activities may include the
issuance and sale of the Company's securities or the structuring of other
business or financial arrangements. The services to be rendered by Advisor to
the Company shall be subject to the following terms and conditions:
1. Engagement. The Company hereby engages Advisor to act as the
exclusive financial advisor to the Company on a best efforts basis upon the
terms and conditions set forth herein, subject to the limitations and exceptions
stated herein, and Advisor hereby accepts such engagement. During the term of
its engagement, Advisor will consult with the Company in developing business and
marketing plans, financial models and funding strategies and in planning and
arranging transactions by which the Company may secure needed funding. In the
event the Company decides to offer its Common Stock or other equity or debt
securities to a limited
<PAGE> 2
number of investors in a private placement in compliance with applicable state
and federal securities laws, Advisor shall assist and advise the Company with
respect to the terms of the offering, the identification of suitable investors
and the preparation of any appropriate private placement memorandum, stock
purchase or subscription agreement or other disclosure or acquisition documents.
In the event the Company proposes to offer its Common Stock or other equity or
debt securities to the public pursuant to a registration statement filed with
the Securities and Exchange Commission in accordance with the Securities Act of
1933, as amended (a "Public Offering"), Advisor shall assist in advising the
Company with respect to the proposed Public Offering, including review of the
registration statement, the selection of the underwriter(s), the terms and
conditions of the agreements with the underwriter(s), and the timing and pricing
of the issue.
2. Compensation To The Advisor.
(a) Reimbursement of Expenses. Subject to the limitations stated
herein, the Company agrees to pay all reasonable out-of-pocket expenses,
including legal fees, travel expenses and other business related disbursements,
incurred by Advisor in acting on the Company's behalf hereunder, whether or not
any transactions contemplated hereunder are actually consummated, and in
addition to the fees payable under paragraphs 2(b) and 2(c) hereof. Advisor will
not expend or obligate the Company for expenses in excess of $1,000 without the
prior approval of the Company.
(b) Hourly Advisory Fees. Advisor shall be paid a fee for advisory
services rendered to the Company hereunder at a rate not to exceed $200 per
hour, whether or not any financing transaction or other Business Arrangement (as
defined below) is consummated, but subject to offset as provided in paragraph
2(d)(3) below. Advisor will not incur more than five hours of such advisory fees
on any one project without providing Company with reasonable notice thereof.
Such fees shall be paid monthly against delivery to the Company of an invoice
for the advisory services rendered.
(c) Success Fees. Subject to the other terms and conditions of this
Agreement, in the event that the Company consummates a debt or equity financing
(other than a Public Offering, the fees for which shall be limited to the hourly
fees set forth in paragraph 2(b) above) or participates in a Business
Arrangement, Advisor shall be entitled to a success fee calculated as follows:
(1) In the event of any transactions involving a private
placement or other issuance of the Company's equity securities (other
than a Public Offering), the Company shall pay Advisor a success fee of
ten percent (10%) of the total sum raised in such transactions.
(2) In the event of any transactions involving a debt
financing, the Company shall pay Advisor a success fee of five percent
(5%) of the gross proceeds to the Company from such transactions.
2
<PAGE> 3
(3) In the event the Company participates in any Business
Arrangements, as hereinafter defined, involving in part the raising of
funds through an issuance of equity securities or a debt financing,
then the Company shall pay to Advisor a success fee with respect to the
equity or debt financing portions of such transactions in an amount
equal to the percentage of the funds raised in such portions of such
transactions that would be payable if the transactions had been debt or
equity financings, the fees for which are payable pursuant to
paragraphs 2(c)(1) and 2(c)(2) above.
(4) In the event the Company participates in any Business
Arrangements, the Company shall pay Advisor a success fee of ten
percent (10%) of the aggregate amount of the acquisition or sale price
(payable in cash or otherwise and including deferred payments, if any),
less the amount of fees payable in cash or otherwise and including
deferred payments, if any), less the amount of fees payable with
respect to such Business Arrangements pursuant to paragraph 2(c)(3)
above.
(5) Any fees payable with respect to any transaction pursuant
to clauses (1), (2) or (3) of paragraph 2(c) shall be reduced by the
amount of any fees payable to any finder, promoter, investment banker,
broker or underwriter involved in the transaction (provided that such
obligation is not incurred in conflict with Advisor's exclusive rights
hereunder), so that the entire fees payable by the Company in
connection with a transaction (but not including fees payable to
attorneys and accountants) do not exceed the amounts provided in
paragraph 2(c).
(d) Retainer.
As a retainer, the Company will issue to Advisor a common
stock purchase warrant to purchase one hundred thousand (100,000)
shares of the common stock of the Company (the "Warrant") at an
exercise price of $2.05 per share exercisable at the Advisor's option
for a period of five (5) years. The Warrant shall be in a form
acceptable to the Advisor and shall be earned when received.
(e) Terms Relating to Payment of Fees.
(1) Subject to the other terms and provisions hereof, the fees
described in paragraph 2(c) hereof shall be payable with respect to any
financing transaction or Business Arrangement (i) consummated during
the term of this Agreement or (ii) consummated within twelve (12)
months after the termination hereof, by, through or with the assistance
of any individual or entity to whom the Company was introduced or with
whom the Company negotiated or communicated (through its officers,
directors or shareholders or through Advisor) during the term of this
Agreement.
(2) Any transactional fees payable under paragraph 2(c) shall
be paid in cash at the closing of the transaction or Business
Arrangement to which the fees relate. In the event the consideration
involved in a Business Arrangement is to be paid other than in cash at
the
3
<PAGE> 4
closing, then the present cash value of such deferred payments shall be
determined by the mutual agreement of Advisor and the Company and the
appropriate fee will be based on such present cash value.
(3) The fees payable with respect to any transaction pursuant
to paragraph 2(c) will be reduced by the amount of any fees paid
pursuant to paragraph 2(b), to the extent the advisory services
rendered for which the hourly fees are payable relate to any
transaction for which the transactional fees are payable.
(4) For the purposes of this Agreement, the term "Business
Arrangement" shall mean the acquisition, consolidation, merger,
purchase or other union of the business or assets or any part thereof
of a third party into or with the Company or an affiliated entity,
whether or not the Company is the surviving entity, or the sale of all
or substantially all of the assets of the Company to a third party.
"Business Arrangement" shall not mean, however, acquisition of a
competitor company, one or more, in the normal cause of effecting the
Company's business plan.
3. Obligations of the Company.
(a) Corporate Authorization. The Company agrees to take all necessary
and appropriate corporate actions to authorize all actions required to
implement, and all agreements and additional documents relating to, the
transactions contemplated hereby.
(b) Furnishing of Information. The Company will furnish to Advisor such
information and documents as Advisor may reasonably request to facilitate the
performance of Advisor's advisory services hereunder, including access to
facilities operated by the Company and to members of the management of Company
and copies of management reports, budgets and the like, furnished to the
management or directors of the Company.
4. Representations and Warranties of the Company. The Company
represents and warrants to Advisor that any information furnished or to be
furnished to Advisor for use in any business and marketing plans, financial
models or funding strategies, and in any private placement memorandum,
registration statement or other disclosure or offering document prepared for use
in connection with any financing transaction, Public Offering or Business
Arrangement will contain no untrue statement of any material fact nor omit to
state any material fact necessary to make the information furnished not
misleading, except to the extent subsequently corrected prior to the date of the
closing of any transaction to which such documentation relates. The Company
further warrants and represents that if the circumstances or facts relating to
information or documents furnished to Advisor change at any time subsequent to
the furnishing of such documentation or information to Advisor and prior to the
date of the consummation of any financing transaction, the Company will inform
Advisor promptly of such changes and forthwith deliver to Advisor documents or
information necessary to insure the continued accuracy and completeness of all
information and documents previously furnished.
5. Representations and Warranties of Advisor. Advisor represents to the
Company that
4
<PAGE> 5
during the term of this Agreement it will not make any untrue statement of
material fact or omit to state any material fact required to be stated or
necessary to make any statements made not misleading concerning any matters or
transactions contemplated by this Agreement. Advisor further represents and
warrants to the Company that all actions taken by it on behalf of the Company in
connection with any financing transaction or Business Arrangement will be
conducted in compliance with all applicable state and federal securities laws
and any procedures that might be reasonably imposed by the Company or its legal
counsel to ensure compliance with such laws.
6. Review and Approval of Documentation. The Company shall have the
right to review and approve, prior to distribution, the content of any business
or marketing plans, financial models, funding strategies, or disclosure or
offering documents prepared by Advisor in the performance of its services
hereunder.
7. Cooperation of Parties. Advisor shall cooperate with the Company and
its counsel with respect to the preparation of any business and marketing plans,
financial models, funding strategies, or any financing transaction, Public
Offering or Business Arrangement and in the preparation of any offering
memoranda, investor questionnaires, stock purchase or subscription agreements,
blue sky law compliance and the like as may be required as a result of any
actions taken by Advisor in the rendering of services to the Company hereunder.
8. No Obligation to Consummate Transactions. The Company shall not be
obligated to enter into any financial transaction or Business Arrangement which
may be presented to it by Advisor and Advisor shall have no authority to make
any representations on behalf of the Company or to otherwise bind the Company in
any manner whatsoever. If the Company elects to consummate a transaction
presented to it by or as a result of the efforts of Advisor, the final terms of
the transaction shall be subject to negotiation by the Company and its legal
counsel. The parties understand and acknowledge that neither party has
represented to or assured the other that a financing transaction or other
Business Arrangement will actually be entered into as a result of Advisor's
services hereunder.
9. Indemnification. The Company agrees to indemnify and hold Advisor
and each of its affiliates, directors, officers, employees and agents and any
person controlling (within the meaning of Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended) any such person or entity (hereinafter referred to collectively as the
"Indemnified Persons") harmless against and from any and all losses, claims,
damages, liabilities, joint or several, suffered or incurred by, or asserted
against, any Indemnified Person (including any amounts paid in settlement of any
action, suit or proceeding brought or threatened to be brought, if such
settlement is effected with the written consent of the Company) under any of the
federal securities laws, under any other statute, common law, or otherwise,
which arises in connection with or is based upon any document or transaction
contemplated by this Agreement but not as to information provided by or
representations made by the Advisor with regard to the Company which the Company
has not generally or specifically authorized, and to reimburse each Indemnified
Person for any travel, legal or other out-of-pocket expenses (including the cost
of any investigation and preparation) reasonably incurred by such Indemnified
Person in connection with any action, suit, proceeding or claim ("Litigation")
for which indemnification under the preceding clause may be
5
<PAGE> 6
sought (including the fees of counsel of such Indemnified Person's choice
retained in connection with investigating or defending against Litigation);
provided, however, that there shall be excluded from such indemnification and
reimbursement any such loss, claim, expense, damage or liability arising out of
or based upon the breach of Advisor's contractual duties to the Company
hereunder or the willful misconduct or gross negligence of the Indemnified
Persons; provided, further, that the Company shall not be liable for any loss,
claim, damage or liability resulting from any settlement entered into by an
Indemnified Person without the written consent of the Company as set forth
above; provided, further, that this indemnity shall not apply to any loss,
claim, damage, liability or expense resulting from information about an
Indemnified Person furnished by such Indemnified Person for use in any offering
or disclosure documentation prepared for use in any financing transaction or
Business Arrangement contemplated hereby. The Company shall be notified by any
Indemnified Person seeking indemnification by registered letter, of any action
commenced against such Indemnified Person, within a reasonable time after such
Indemnified Person shall have been served with the summons or other first legal
process or shall have received written notice of the threat of a claim in
respect of which an indemnity may be claimed, giving information as to the
nature and basis of the claim, but failure so to notify the Company shall not
relieve the Company from any liability which it may have hereunder or otherwise
except to the extent that such failure so to notify the Company materially
prejudices the rights of the Company. The Company shall be entitled to
participate at its own expense in the defense, and if the Company so elects
within a reasonable time after receipt of such notice, or if all Indemnified
Persons seeking indemnification on such notice so direct, the Company shall
assume the defense of any Litigation brought to enforce any such claim, and in
either such case, such defense shall be conducted by counsel chosen promptly by
the Company and reasonably satisfactory to Advisor; provided, however, that, if
the defendants in any such action include both an Indemnified Person and the
Company and such Indemnified Person shall have been advised by its counsel that
there may be legal defenses available to such Indemnified Person which are
different from or additional to those available to the Company, and which in the
reasonable opinion of such counsel are sufficient to make it undesirable for the
same counsel to represent both the Company and such Indemnified Person, such
Indemnified Person shall have the right to employ his own counsel in such
Litigation, and in such event the reasonable fees and expenses of such counsel
shall be borne by the Company. The foregoing indemnity and reimbursement
agreement shall be in addition to any other rights which an Indemnified Person
may have at common law or otherwise.
10. Term and Termination of Agreement. This Agreement shall remain in
full force and effect for a term of one (1) year from the date hereof, subject
to earlier termination as provided below, and subject to extension by mutual
agreement of the parties for an additional twelve (12) month period. During the
term hereof and subject to the limitations and exceptions stated herein, Advisor
shall be the exclusive financial advisor to the Company and the Company agrees
not to enter into any similar or like agreement with any other party during such
period without the prior written consent of Advisor. Advisor's engagement
hereunder may be terminated by either Advisor or the Company at any time after
the first anniversary of the date hereof. Following the expiration of this
Agreement or if Advisor's engagement is earlier terminated by the Company as
permitted herein, Advisor will be entitled to its full fees under paragraph 2(c)
of the Agreement with respect to financing transactions and Business
Arrangements consummated within twelve (12) months after such expiration or
termination, subject to the provisions of paragraphs 2(d) and 11 hereof, with
regard to
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<PAGE> 7
any contact given the Company by Advisor. The indemnity provisions set forth
herein shall survive any termination of the Advisor's engagement hereunder.
11. Limitations and Exceptions to Exclusivity. The exclusivity
provisions of this Agreement are suspended until such time as Company has
received at least a $1 million capital infusion from the efforts of Advisor at
which time such provisions become effective ("Effectiveness"). On Effectiveness,
the exclusivity provisions of paragraphs 1, 2 and 10 hereof do not apply to
those persons and entities listed on Exhibit A hereto until June 30, 1998, when
the exclusivity provisions of this Agreement apply in all cases and to all
persons and entities without exception.
12. Rights of Parties. Advisor shall be entitled to assign all of its
rights and obligations hereunder to its designee reasonably acceptable to the
Company. Such assignment shall be effective upon the execution by such assignee
of a counterpart of this Agreement. Upon such assignment, the term "Advisor" is
used herein shall refer to such assignee. Except as otherwise provided above, no
party shall be entitled to transfer or assign any or its rights or obligations
hereunder without the prior written consent of the other party. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of, the
parties and their respective successors and assigns.
13. Legal Counsel; Waiver of Conflict of Interest. The parties have had
the opportunity to consider the terms of this agreement with their respective
legal counsel and have either obtained the advice of legal counsel in connection
with their execution hereof or do hereby expressly waive their right to seek
such legal counsel in connection with this transaction. Advisor and the Company
recognize that the law firm of Robert K. Rogers & Associates has represented
each of them in the past, is presently representing them, and is likely to
represent each of them in the future. As a result, both Advisor and Company
waive any and all conflicts of interest which may have existed, which may exist
or which may arise in the future as a result of such representation.
14. Governing Law. This Agreement shall be interpreted in accordance
with its terms and otherwise in accordance with the laws of the State of Utah
applicable to contracts entered into and to be performed entirely within such
State.
15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements, understandings, representations and statements, if any,
whether oral or written, with respect to the subject matter hereof. No
modification of this Agreement shall be valid or binding upon the parties hereto
unless made in writing and signed on behalf of each party hereto by its
respective authorized officer.
16. Headings. The headings used in this Agreement have been inserted
for convenience only and are not to be considered in construing the meaning of
the Agreement.
If the foregoing is in accordance with the Company's understanding,
please sign and return
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<PAGE> 8
the enclosed copy of this letter, whereupon this Agreement shall constitute a
binding agreement between the Company and Advisor.
Sincerely yours,
Kirby D. Cochran
President
This Business and Financial Advisory Agreement is acknowledged and agreed to by
the undersigned as of this 16 day of March, 1998.
Venturi Technology Enterprises, Inc.
By /s/ Gaylord Karren
Gaylord Karren, Chairman and CEO
8
<PAGE> 9
Exhibit A
PERSONS AND ENTITIES EXCLUDED FROM THE EXCLUSIVITY
PROVISIONS OF THAT CERTAIN BUSINESS AND FINANCIAL
ADVISORY AGREEMENT BETWEEN
VENTURI TECHNOLOGY ENTERPRISES, INC. AND CDL CAPITAL CORP. DATED MARCH 10, 1998:
1. Northstar Capital
2. Jeff Brimhall
3. Mercantile Finance Corp.
4. Those persons and entities listed on Attachment A hereto
9
<PAGE> 1
Exhibit 10.43
OFFICE OF THE
CORPORATIONS SECTION
SECRETARY OF STATE
P.O. Box 13697
Austin, Texas 78711-3697
APPLICATION FOR CERTIFICATE OF AUTHORITY
Pursuant to the provisions of article 8.05 of the Texas Business Corporation
Act, the undersigned corporation hereby applies for a certificate of authority
to transact business in Texas:
1. The name of the corporation is "Venturi Technology Enterprises, Inc."
2. A. If the name of the corporation in its jurisdiction of incorporation
does not contain the word "corporation," "company," "incorporated," or
"limited" (or an abbreviation thereof), then the name of the
corporation with the word or abbreviation which it elects to add for
use in Texas is: "Venturi Technology Enterprises, Inc."
B. If the corporate name is not available in Texas, then set forth the
name under which the corporation will qualify and transact business in
Texas "Venturi Technologies, Inc." (Venturi Technology Enterprises,
Inc. is the successor company to Venturi Technologies, Inc. a Texas
company. Venturi (Texas) merged with a company in Nevada in 1997.
Venturi (Nevada) is the surviving corporation).
3. It is incorporated under the laws of Nevada.
4. The date of its incorporation is January 30, 1997, and the period of
duration is perpetual.
5. The address of its principal office in the state or country under the
laws of which it is incorporated is:
2920 North Green Valley Parkway
Building 3, Suite 321
Henderson, NV 89014
6. The street address of its proposed registered office in Texas is:
350 South Beltline, Suite 101
Irving, TX 75060
<PAGE> 2
and the name of its proposed registered agent in Texas at such address
is
Bill Thomas
7. The purpose or purposes of the corporation which it proposes to pursue
in the transaction of business in Texas are: carpet cleaning and
related products and services.
8. It is authorized to pursue such purpose or purposes in the state or
country under the laws of which it is incorporated.
9. The names and respective addresses of its directors are:
NAME ADDRESS
Gaylord Karren 1327 N. State St., Orem, UT 84057
John Hopkins 1327 N. State St., Orem, UT 84057
10. The names and respective addresses of its officers are:
NAME ADDRESS OFFICE
(city and state)
Gaylord Karren 1327 N. State St., Orem, UT 84057 CEO &
Chairman
John Hopkins 1327 N. State St., Orem, UT 84057 President
Randy K. Johnson 170 S. Main, Ste 900., SLC, UT 84101 Secretary
11. The aggregate number of shares which it has authority to issue,
itemized by classes, par value of shares, shares without par value, and
series, if any, within a class, is:
<TABLE>
<CAPTION>
NUMBER OF CLASS SERIES PAR VALUE PER SHARE
SHARES OR STATEMENT THAT
SHARES ARE WITHOUT
PAR VALUE
<S> <C> <C> <C>
20,000,000 Common $0.001
---------- ------ ------ ------
150,000 Preferred A No par value
----------- --------- ------ ------------
1,000,000 Preferred B No par value
----------- --------- ------ ------------
</TABLE>
<PAGE> 3
12. The aggregate number of its issued shares, itemized by classes, par
value of shares, shares without par value, and series, if any, within a
class, is:
<TABLE>
<CAPTION>
NUMBER OF CLASS SERIES PAR VALUE PER SHARE
SHARES OR STATEMENT THAT
SHARES ARE WITHOUT
PAR VALUE
<S> <C> <C> <C>
4,300,000 Common $0.001
- --------- ------ -------- ------
64,000 Preferred A No par value
- ---------- --------- ------- ------------
0 Preferred B No par value
- ------------ --------- ------- ------------
</TABLE>
13. The amount of its stated capital is $645,000. (See instructions for
definition of stated capital.)
14. Consideration of the value of at least One Thousand Dollars ($1,000.00)
has been paid for the issuance of its shares.
15. The application is accompanied by a certificate issued by the secretary
of state or other authorized officer of the jurisdiction of
incorporation evidencing the corporate existence and dated within 90
days of the date of receipt of the application.
Venturi Technology Enterprises, Inc.
By: /s/ Randy K. Johnson
Randy K. Johnson
Its Secretary and Authorized Officer
Form No. 301
Revised 6/96
The Office of the Secretary of State does not discriminate on the basis of race,
color, national origin, sex, religion, age or disability in employment or the
prevision of services.
<PAGE> 1
Exhibit 21.0
SUBSIDIARIES OF
VENTURI TECHNOLOGIES, INC.
1. T-CO Manufacturing, Inc.
a Utah corporation
d.b.a. T-CO Manufacturing, Inc.
2. Venturi Technologies, Inc.
a Texas corporation
d.b.a. Venturi Technologies, Inc.
<PAGE> 1
Exhibit 23.0
MACKEY PRICE & WILLIAMS
A Professional Corporation
Attorneys and Counselors at Law
RANDY K. JOHNSON Suite 900 Telephone (801) 575-5000
OF COUNSEL 170 South Main Street Fax (801) 575-5006
Salt Lake City, Utah 84101-1655 e-mail: [email protected]
July 29, 1998
We hereby consent to the use of our name under the caption
"Legal Matters" in the Prospectus forming part of the Registration Statement on
Form SB-2 of Venturi Technologies, Inc., a Nevada corporation, and to the filing
of the opinion included as Exhibit 5.0 to the Registration Statement.
/s/ MACKEY PRICE & WILIAMS
<PAGE> 1
Exhibit 23.1
COPY
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 of our
report dated May 19, 1998, on our audits of the financial statement of Venturi
Technologies, Inc.
CHILD & COMPANY, PC
Salt Lake City, Utah
July 21, 1998
