AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1998
REGISTRATION NO. 333-60491
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VENTURI TECHNOLOGIES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 7217 86-0853635
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
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:
Robert K. Rogers, Esq. Randy K. Johnson, Esq.
Meyer, Hendricks, Bivens & Moyes, P.A. Mackey Price & Williams
3003 North Central Avenue, Suite 1200 170 South Main Street, Suite 900
Phoenix, AZ 85012-2915 Salt Lake City, UT 84101-1655
(602) 604-2200 (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
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM PROPOSED REGISTRATION
OF SECURITIES TO REGISTERED OFFERING PRICE AGGREGATE FEE
BE REGISTERED PER SHARE OFFERING
Common Stock. 1,654,862 $3.125 $6,108,943.75 $1,799.50
Additional common stock 501,642 $3.00 $1,504,926.00 $443.98
(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.
<PAGE>
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>
VENTURI TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
ITEM NUMBER AND CAPTION PROSPECTUS HEADING
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 Not Applicable
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
Transactions Related Transactions
20. Market for Common Stock Shares Eligible for Future
Sale
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure Not Applicable
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 OCTOBER 16, 1998
<PAGE>
2,156,504 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 2,156,504 shares of Common Stock, par value .001 per share,
of Venturi Technologies, Inc. (the "Common Stock"), 500,000 shares
are being offered by Venturi Technologies, Inc. to the public, and
1,656,504 shares are being registered for possible distribution to
certain stockholders (the "Converting Stockholders") on conversion
of their Venturi 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. Proceeds from the sale of Common Stock to the public
will be used to pay the expenses of this offering and to provide
working capital for Venturi.
The shares are being offered on a best efforts, no minimum, basis
by Venturi's officers and directors (who will not be paid for such
services). No assurance can be given that all Common Stock offered
hereby will be sold. 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 September 27, 1998, the last sale
price per share of the Common Stock as reported on the Bulletin
Board was $2.75. See "Price Range for Common Stock." The public
offering price is based upon the quoted price of the Common Stock
as of a date not more than five (5) days prior to commencement of
this offering.
There has not been an active market for the Common Stock prior to
this offering, and there can be no assurance that an active market
will develop by reason of this offering. See "Risk Factors."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION FROM THE OFFERING PRICE. SEE "RISK
FACTORS" AND "DILUTION." THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC COMPANY(1)
Per Share. . . .$ $-0- $
Total . . $ $-0- $
This offering will terminate not later than November 9, 1998 (the
"Termination Date").
THE DATE OF THIS PROSPECTUS IS OCTOBER 16, 1998
<PAGE>
(1) 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. Such expenses
include filing, legal, accounting, printing and other miscellaneous
fees. Venturi will use the net proceeds from the offering for
general working capital for its ongoing operations.
(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>
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, Stockholder 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 500,000 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.
6,909,308 shares of Common Stock will be
outstanding if all shares offered are sold and
issued on conversion of the Preferred Stock.
CONVERTING Venturi is also registering 1,656,504 shares
STOCKHOLDERS of Common Stock and will offer them to certain
Preferred Stockholders on conversion of their
Preferred Stock. The Preferred Stockholders will
have ten business days in which to accept the
conversion offer.
<PAGE>
USE OF Venturi will use the proceeds of the Offering
PROCEEDS to pay the expenses of the Offering and to
provide working capital. If all of the Common
Stock offered is not sold, Venturi will fund
the expenses of the Offering from cash flow.
SUMMARY FINANCIAL INFORMATION
The summary 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 summary data for the six months ended June
30, 1998 are derived from Venturi's unaudited interim 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 expected of any future period.
SUMMARY FINANCIAL INFORMATION
(In Thousands, Except Per Share Data)
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
1996 1997 (Unaudited) June 30
1997 1998
STATEMENT OF INCOME DATA:
Revenues $1,998 $2,161 $1,080 $2,202
ncome (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 (1) ( .49) ( .79) ( .40) ( .25)
Weighted average number of
Shares outstanding 2,342 4,069 3,929 4,753
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<PAGE>
DECEMBER 31, JUNE 30
1996 1997 1997 1998
Actual Actual (Unaudited)
(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)
(1) Earnings per share data has been restated to conform with the
requirements of FASB 128.
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.
PROJECTIONS This Prospectus contains information, such as
projections, future expectations and other
"forward-looking" statements (that is, projections
of revenues, income or loss, earnings or losses,
capital expenditures or other financial items;
statements of plans and objectives for future
operations; statements of future economic
performance; and statements of the assumptions on
which the foregoing are based). This information
and statements represent Venturi's objectives,
expectations or beliefs. Generally, such
statements can be identified 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 Venturi has a limited operating history upon which to
OPERATING base an evaluation of its prospects. Venturi's prospects
HISTORY 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.
LOSSES As of December 31,
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<PAGE>
1997, Venturi had an accumulated deficit of $4,801,971
and a stockholder deficit of $1,155,558. 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 Because Venturi has been in existence for a short period
ASSOCIATED of time, it is difficult to accurately forecast its
WITH revenues. Venturi's current and estimated future expense
IMPLEMENTING levels are based largely on its estimates of future
VENTURI'S revenues. If revenues are not as anticipated, Venturi
BUSINESS may be unable to adjust spending in a timely manner to
STRATEGY 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.
RISKS Venturi has completed a number of acquisitions
ASSOCIATED since 1995, and expects to pursue additional
WITH acquisitions in the future as a key component
ACQUISITIONS 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 necessary 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
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<PAGE>
or the issuance of additional capital stock which could
dilute the holdings of other stockholders.
DEPENDENCE Venturi's success is heavily dependent upon the
UPON continued active participation of its current
KEY executive officers, key employees and consultants,
PERSONNEL particularly Gaylord M. Karren and John M. 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
in the carpet cleaning industry 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
technologies may increase the competitive pressures
on Venturi. See "Description of Business-Competition."
RELIANCE Venturi relies upon third parties to manufacture
ON certain equipment used in its business. If any one
THIRD of the manufacturers was unable or unwilling to
PARTIES continue manufacturing and selling the necessary
FOR equipment, Venturi's business, results of
EQUIPMENT operations and financial condition could be
materially adversely affected. Venturi does not
maintain business interruption insurance.
MANAGEMENT Venturi has expanded its operations very
OF quickly, and expects that further expansion
POTENTIAL will be required to exploit the potential for
GROWTH 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
5
<PAGE>
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 could be adversely
affected. See "Management's Discussion and Analysis."
LIMITED Venturi regards its service mark and related
PROTECTION technology as proprietary and relies on a
OF combination of copyright, trademark, trade
INTELLECTUAL secret and confidential information laws as
PROPERTY well as employee and third-party nondisclosure
AND PROPERTY agreements to protect its proprietary rights.
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.
DEPENDENCE ON Venturi's success will depend in part on its ability
TRADEMARKS, to obtain and preserve its patents and trademarks
PATENTS, AND and to operate without infringing the proprietary
PROPRIETARY rights of third parties. Venturi cannot guarantee
RIGHTS; NO that its patent and trademark applications will provide a
ASSURANCE OF competitive advantage or afford protection against
ENFORCEABILITY competitors with processes or services 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
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<PAGE>
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 There are no long term studies of the health or other
CLINICAL effects of sustained exposure to carpet or other
STUDIES 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 Venturi has never paid any dividends on its Common
ON COMMON Stock and, because of its present financiaL condition and
STOCK cash flow requirements, does not expect to pay any dividends
ANTICIPATED 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 Sales of substantial numbers of shares of Common
AVAILABLE Stock in the public market following this Offering
FOR RESALE could adversely affect the market price 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 6,909,308 shares of Common Stock
outstanding. 2,226,000 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."
7
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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 $3.00 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 increase to approximately $1,058,172, or
$.15 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 $2.85 (95%) 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 OFFICERS Venturi's Articles of Incorporation and Bylaws
DIRECTORS require or permit it to indemnify and hold harmless
its directors and 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 Prior to this Offering, there has been no active market
ACTIVE for the Common Stock, although the Common Stock is quoted
MARKET; on the OTC Bulletin Board. Venturi cannot guarantee that
POSSIBLE an active trading market for the Common Stock will
VOLATILITY develop. The trading price of Common Stock could be
OF PRICE OF subject to wide fluctuations in response to such factors
COMMON STOCK as, among others, variations in anticipated or actual
results of operations and market conditions.
RISK OF Since Venturi's securities are not quoted on the NASDAQ
LOW-PRICE SmallCap Market, they are subject to Rule 15g-9 under the
STOCK 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.
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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 would not
apply to Venturi's securities if they were included on
the NASDAQ SmallCap Market and have certain price and
volume information provided on a current and continuing
basis or were to 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. Therefore, the market
liquidity for the Common Stock could be severely
adversely affected.
LACK OF A Upon completion of the Offering, Venturi's board of
MAJORITY OF directors will have no independent directors. As
INDEPENDENT such, upon completion of the Offering, the majority
DIRECTORS of its directors will be either officers, persons
related to the officers, or persons appointed by
the holders of the Series B Preferred Stock. See
"Management."
GOVERNMENT Venturi is subject to regulation under various
REGULATION state and 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 After this Offering, Venturi's directors and
OF OWNERSHIP; all executive officers will beneficially own
CERTAIN ANTI- approximately 33.25% of the outstanding Common
TAKEOVER Stock. Accordingly, these stockholders will
CONSIDERATIONS 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
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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 the 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 Venturi has consummated a number of acquisitions
LEGAL COUSEL over the course of the past four years. Venturi
IN was not represented by legal counsel in connection
ACQUISITIONS with all of those transactions. The fact that
Venturi was not represented by counsel in some
acquisitions may increase the risk of future
litigation arising out of those transactions.
Venturi believes that such transactions qualified
for tax-free treatment and for exemptions from
securities registration requirements based on
consultations with its accountants and legal
counsel as to the general structure used in those
transactions. If it is subsequently determined
that the acquisitions created tax liability for
Venturi or violated applicable securities laws,
this could have a material adverse effect on
Venturi and its operations and financial condition.
Venturi is involved in litigation with respect to
an acquisition of two related businesses. Venturi
was represented by counsel in that transaction.
Although it is difficult to assess the possible
outcome of this litigation, Venturi believes it
will not be material. This belief is based in part
on the fact that the plaintiffs provided Venturi
with a detailed itemization of their claimed
damages during pre-litigation settlement
negotiations. The itemization reflected
approximately $57,000 in damages. See "Legal
Proceedings."
YEAR 2000 RISK Venturi began computer automation in 1997. Its
systems consist primarily of stand-alone personal
computers. Venturi has reviewed its 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. Venturi has
contacted those
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third parties with whom it has material relationships,
such as banks and vendors, to ascertain their level of
preparedness for Year 2000. Responses to date have
been mixed, and not all parties can assure Venturi of
their readiness. Venturi intends to continue to monitor
this situation and, if necessary, to replace any
relationships with entities that are not prepared
or that expect to experience substantial business
interruptions. 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.
FAILURE TO The proceeds from the sale of Common Stock to the
SELL COMMON public will be used to pay the expenses of the
STOCK OFFERED offering and to provide working capital to support
HEREBY Venturi's operations. If all Common Stock offered
hereby is not sold, Venturi will be required to pay
the Offering expenses and fund its operations from
cash flow. This could have a material adverse
effect on Venturi's ability to provide funds for
its continuing operations.
USE OF PROCEEDS
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 to pay the Offering expenses and provide working
capital to support Venturi's operations. 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 assuming
that all Common Stock offered hereby is sold.
Total Proceeds to Company $1,500,000
Less Offering Expenses:
Legal and Accounting 80,000
Printing 10,000
Filing Fees 5,000
Miscellaneous 5,000
Net Proceeds to Company $1,400,000
Intended Use of Proceeds:
General Working Capital $1,400,000
All net proceeds 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. No assurance can be given that all Common
Stock offered will be sold. If the proceeds received by Venturi
are not sufficient to pay the expenses of the offering, Venturi
will be required to pay the remaining Offering expenses and fund
its working capital needs out of cash flow from its operations.
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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.
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 6,909,308 shares of Common Stock outstanding having
a net tangible book value of approximately $1,058,172 or
approximately $.15 per share if all the Common Stock offered is
sold. The net tangible book value of each share will increase to
approximately $.15 per share from approximately ($.07) per share
for present stockholders, and decrease by $2.85 per share (a
dilution of 95%) to public investors, assuming that all of the
Common Stock offered is sold at a price of $3.00 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
Shares Purchased Total Cash Consideration Average Price
Number Percent Amount Percent Per Share (1)
Existing Common
Stockholders 4,752,804 68% $1,473,834 23% $ .31
Series A Conversion 64,410 1% $ 644,100 10% $10.00
Series B Conversion 1,250,000 18% $2,000,000 31% $1.60
Series C Conversion 406,504 6% $ 833,333 13% $2.05
New Investors 500,000 7% $1,500,000 23% $3.00
TOTAL 6,973,718 100% $6,451,267 100%
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(1) Based on the average value per share paid by present
stockholders and an assumed public offering price of $3.00 per
share of Common Stock to be paid by public investors.
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 an exercise
price of $.01 per share; and 570,007 incentive stock options to
other employees at an exercise 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 at any time before
February 17, 2008. 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 all shares of Common Stock offered by
Venturi (based upon an initial public offering price of $3.00 per
Share and the application of the net proceeds therefrom and the
issuance to the converting Stockholders of all Common Stock
registered for issuance upon conversion of the Series B and C
Preferred Stock). The table should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this
Prospectus.
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JUNE 30, 1998
Prior to Offering Actual(1) As Adjusted(2)
(Unaudited) (Unaudited)
Stockholders' equity:
Common Stock, $.001 par value, $ 4,753 $ 5,253
20,000,000 shares authorized;
4,752,804 shares outstanding
Additional paid-in-capital 4,233,543 5,633,043
Preferred Stock, $.001 par value,
5,000,000 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) (4,580,188)
Total capitalization ($341,197) $1,058,172
(1) Derived from Venturi's Financial Statements, which are included
elsewhere in this Prospectus.
(2) As adjusted to reflect the application of all 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:
6,909,308 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 expected of
any future period.
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SELECTED FINANCIAL INFORMATION
(In Thousands, Except Per Share Data)
Year Ended
December 31 Six Months Ended June 30
1996 1997 1997 1998
(Unaudited)
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
Net Income Loss (1,148) (3,162) (1,581) (1,198)
Net income (loss) per share (1)
Weighted average shares
outstanding 2,341,962 4,068,784 3,928,976 4,752,804
December 31, June 30,
1996 1997 1997 1998
(Unaudited)
Balance Sheet Data:
Total assets $973 $995 $998 $1,874
Long-term debt 1,241 1,284 925 1,783
Stockholders' equity (731) (1,156) (1,088) (341)
(1) Earnings per share data has been stated to conform with the
requirements of FASB 128.
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 acquires unrelated companies that typically are much
smaller than Venturi. Ordinarily, the owners of the target company exchange
all or substantially all of the target company's assets or stock for Venturi
common stock. Each acquisition has been treated as a pooling-of-interest
business combination
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wherein the operating results of each combined entity have been included in
Venturi's financial statements as though the acquired business had been
combined as of the beginning of each year. Due to the small relative size
and low profitability of the target companies, the effect on Venturi's balance
sheet is not material. The effect on Venturi's income statement also is not
material. Each target company is similar to other target companies such that
separate segment disclosures of each acquisition are not required to fairly
state Venturi's financial condition.
The combined entities will record assets and liabilities in accordance with
generally accepted accounting principles. Venturi's management anticipates
no adjustments to net assets of any of the combined entities to comply with
or adopt the same accounting principles or the same fiscal years. Under the
pooling-of-interests method of accounting, the retained earnings accounts
of all entities will be combined.
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 Lubbock, Texas, utilizing a proprietary technology
and process. The primary costs of operating Venturi's business are the trucks
and vans used to 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. At June 30, 1998, Venturi's capital resources consisted of private
equity funding of $2,582,000, equipment leases of $1,299,000 and cash on hand.
Venturi's primary liquidity needs are $1,400,000 to cover corporate overhead
through December 31, 1998 and $5,400,000 to fund purchases of additional
capital equipment. Historically, Venturi has funded its operations through
operating income, bank borrowings, and private placements of securities.
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Venturi will use the proceeds from this Offering to fund its overhead through
December 31, 1998. Venturi will need additional financing to meet its
anticipated working capital requirements for at least the next twelve months.
Venturi's business plan calls for it to have a total of 153 trucks in
operation by December 31, 1998. Venturi presently has approximately 50 trucks
in service. $3,000,000 is available to fund truck and equipment purchases
pursuant to a Master Lease Agreement with Northstar Capital, L.L.C. Venturi
has signed four (4) equipment schedules having balances of $182,186, $112,577,
$262,665, and $192,371. Additional trucks will be funded with the remaining
$2,000,000 available under the Northstar Capital, L.L.C. leasing facility.
Venturi has also received a commitment for up to $3,000,000 in additional
lease financing from Capital Partners, Inc. There is $1,000,000 remaining to
be paid to Venturi by the Series B Preferred Stockholders. These facilities
should be adequate to fund Venturi's capital equipment purchases.
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.
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.
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.
LIQUIDITY AND CAPITAL RESOURCES
During the year ending December 31, 1996, Venturi received $649,000 in new
funding, compared with $1,235,000 in new funding during the year ending
December 31, 1997. New funding in 1996 was provided by $124,000 in capital
leases, and $525,000 from private placements of securities. New funding in
1997 was provided by $146,000 in capital leases and $1,089,000 in private
placements of securities.
SEASONALITY
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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."
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.
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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 HiTek
Carpet Care, Inc. Venturi was formed 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, HiTek issued 2,807,714 shares of its common stock to the
shareholders of Action Venturi Technologies, Inc., a Texas Corporation formed
on August 17, 1994 (the "Texas Corporation"). 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, HiTek Carpet Care, Inc. changed its name to Venturi
Technology Enterprises, Inc., and recently changed its name to Venturi
Technologies, Inc. As a result of the exchange, the former Venturi
stockholders attained ownership and voting control of HiTek. 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".
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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. 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. 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. In August of 1998, Venturi acquired
substantially all of the assets of Dirt Free Carpet and Upholstery Cleaning,
Inc., a Texas Corporation, with operations in Houston, Texas. The transaction
remains subject to a right of rescission that runs for 90 days after closing.
Venturi has agreed to pay $150,000 in cash to the owner of Dirt Free, in
consideration of his execution of a confidentiality and non-competition
agreement, and to issue 52,632 shares of its common stock to the sellers in
exchange for the assets upon expiration of the rescission period.
Venturi has agreed in principal to acquire substantially all of the net assets
of a fire and flood restoration business located in Orem, Utah in exchange for
4,000 shares of Venturi Common Stock. Subject to final due diligence and
satisfaction of other conditions, this acquisition should be completed within
the next 90 days. Venturi is engaged in ongoing negotiations for acquisition
of stock or assets of other carpet cleaning companies; however, none of such
negotiations has resulted in any binding formal agreement or agreement in
principle.
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."
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To preserve its capital resources, Venturi consummated some of these
transactions without the assistance of legal counsel. 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, based on consultations with its accountants and legal counsel
as to the general structure used in those transactions. However, Venturi did
not receive a formal opinion of counsel to that effect in connection with each
transaction. Venturi's legal counsel prepared the form documents used to
effect the transactions. 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, single-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 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).
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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, using billboards, distribution of coupons, yellow pages
advertising, 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. Destiny Recovery
Systems, L.C. is a Nevada limited liability company, of which 30% is owned by
Venturi and 70% is owned by Gaylord M. Karren and John M. 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
has in the past purchased these machines from an unrelated third party at a
cost of $6,000 per machine. Primacide has manufactured a new, more efficient
model of this machine, which will be available to Venturi at a price of $9,500
per machine. No payments have yet been made to Primacide for EO water
manufacturing machines, and Venturi expects to fund purchases from Primacide
under capital leases. 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
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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.
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.
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COMPETITION
According to spectrometer tests conducted by Combustion Resources, a Utah
limited liability company, VenturiClean(TM) removes virtually all foreign
matter (that is, 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.
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.
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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:
PURPOSE LOCATION
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
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 six 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 Agreement, Venturi has signed 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 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.
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In May of 1998, Venturi received a commitment from Capital Partners, Inc. for
lease financing in an amount of up to $3,000,000.
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. During
pre-litigation settlement negotiations, the plaintiffs provided Venturi with
a detailed itemization of their claimed damages in the amount of $57,000.
Therefore, Venturi believes the actual damages are substantially less than the
amount requested. As a result, Venturi believes that any damage award should
not be material; 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.
MANAGEMENT
The following table sets forth certain information regarding the directors and
executive officers of Venturi.
NAME AGE POSITION
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
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Ronald M. Karren 36 Vice President of Corporate
Communications, and Secretary
James Stone 35 Vice President of Operations
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 members, and
Venturi will establish an audit committee and a compensation committee,
consisting of at least two 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 enrolled in the
Texas Tech Graduate School Clinical Psychology Master/
Doctorate Program in 1976.
Merril L. has served as Venturi's Chief
Littlewood 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
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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 $100,000 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.
NAME/ POSITION YEAR SALARY BONUS OTHER OPTIONS
Gaylord M. 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 M. Hopkins 1997 90,000 none none none
President and Director 1996 90,000 none none none
1995 57,000 none none none
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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 is being
administered by 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 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 exercise
price and the fair value of the underlying stock at the date of grant (which
was $3.50 per share). Venturi has not yet recorded any compensation expense
for options granted in 1998.
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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:
Name Unexercised Options Value of Unexercised
Options (1)
Gaylord M. Karren (2) 104,000 $ 310,960
John M. Hopkins (2) 104,000 $ 310,960
Merril L. Littlewood (2) 400,000 $ 1,196,000
Joel Karren (3) 71,800 $ 43,080
William Thomas (3) 28,500 $ 17,100
James Stone (3) 2,000 $ 1,200
Ronald M. Karren (3) 2,000 $ 1,200
(1) Calculated using an assumed public offering price of $3.00.
(2) These options have an exercise price of $.01.
(3) These options have an exercise price of $2.40.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gaylord M. Karren, John M. Hopkins, James A. Frame, Jason Karren, Jack Paris
and Wayne Mortensen founded Action Venturi Technologies, Inc. (the "Texas
Corporation") in August 1994 and would be considered promoters of Venturi.
In connection with the formation of Action Venturi Technologies, Inc., Gaylord
M. Karren, John M. Hopkins and James A. Frame each purchased 106,690 shares
of common stock at a price of $.22 per share, for a total of $69,164. Jason
Karren, Jack Paris and Wayne Mortensen each contributed $10,000 in cash plus
the value of past services rendered to Venturi in exchange for 40,000, 35,000
and 35,000 shares of Common Stock in September, 1994. In addition, in
consideration for past services rendered to Venturi, shares of common stock of
that corporation were issued to Eric Dekker (45,833 shares), Joel Karren
(4,500 shares) and Dale Karren (5,000 shares).
In connection with the organization of HiTek Carpet Care, Inc. in January of
1997, the following persons purchased Common Stock at $.10 per share, for a
total consideration of $150,000: Eileen Albertson; Autumn Leaf, Inc.; Battle
of Midway Incorporated; J.C. Blanleil; Rachael A. Burton; Mary Ann Coleman;
Delta Financial Resources, Inc.; Diversified Lenders, Inc.; Gayle Dorrsey;
Ronald L. Drake; Marci Evans; Darlene Fawcett; Kris Gornichec; Emil
Gulbranson; Melville K. Gulbranson; Rebecca Gulbranson; Kerri Heavenor; Betty
Hurtado; Dixie Hutchins; Garth P. Jarman; Bryan L. Jeffery; Wydell Jeffery;
Jana Jensen; Jacob D. Klassen; Linda Klassen; John J. Kochel; Mark Larson;
Roslyn Mackay; Mary Magouirk; Renetta Mecham; MK Resources, Inc.; Tracy J.
Nelson; Suzanne Pancheri; Freddie C. Roberts, Jr.; Karen Roberts; Janis and
David R. Rowberry; Lise-Lotte Ruzicka; Nancy Smithanik; Symmetry Inc.; Jeffery
Clark Tanner; Max C. Tanner; Mont E. Tanner; Renee Tieman; C.F. Walker; Gordon
J. Weaver; Kimberly Witter; and Monica Young.
None of the persons in the immediately preceding paragraph is the beneficial
owner of 5% of Venturi's Common Stock. Venturi has not engaged in any
transactions with the foregoing persons except the stock for stock exchange
described under "History and Development of Venturi."
Merril L. Littlewood, the Chief Financial Officer of the Company, is also a
principal in Potter Littlewood & Petty, P.C., certified public accountants.
Potter Littlewood & Petty, P.C. has prepared Venturi's tax returns for the
years 1995, 1996, and 1997.
Venturi has outstanding loans from its executive officers and principal
stockholders. It presently owes Gaylord M. Karren $83,591; John M. Hopkins
$55,000; and James Stone $314,583. The loans from Gaylord M. Karren and John
M. Hopkins do not bear interest, are payable on demand, and have no scheduled
repayment terms with the exception of payment of $1,950 per month to Mr.
Karren to enable him to repay the source of the loan funds, a second mortgage
on his personal residence. The loans from James Stone bear interest ranging
from 8.9% to 17.11%. Monthly payments on the loans from James Stone are
$6,000.
Venturi issued 700,866 shares of Common Stock to Gaylord M. Karren and John M.
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,
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of which Gaylord M. Karren and John M. 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; payments will
be paid in the future for the purchase of the EO water manufacturing machines.
See "Raw Materials; Patents; Licenses; Trademarks and Service Marks." Venturi
has loaned Primacide $40,024 to fund its ongoing operations. This loan bears
interest at 8% per annum, and is payable on demand at any time after March 1,
1999.
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 into 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. ("ESL"), 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 stockholders are being
given the opportunity to exercise their right to convert their Series B
Preferred Stock for shares of Common Stock included in this Offering.
Venturi also is a party to a Registration Rights Agreement with
Entrepreneurial Investors, Ltd. ("EIL"), 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 EIL own
all of the issued and outstanding shares of Venturi's Series B Preferred
Stock. The Registration Rights Agreement grants EIL 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 commenced
December 31, 1997, and Venturi is obligated to use its best efforts to effect
such a registration. Also commencing on December 31, 1997, EIL is entitled
to participate in any registration of Common Stock initiated by Venturi. In
connection with this Offering, the Series B Preferred stockholders are being
given the opportunity to exercise their right to convert their Series B
Preferred Stock into shares of Common Stock included in this Offering.
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Venturi is a party to a Business and Financial Advisory Agreement with CDL
Capital Corp. (now known as Invest Linc 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 asuccess 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 the persons listed. The table assumes that there will are
8,114,794 shares of Common Stock beneficially owned before the Offering; and
that there will be 8,614,794 shares of Common Stock beneficially owned after
the Offering (being the sum of 4,752,804 shares of Common Stock outstanding as
of June 30, 1998 plus (i) the 2,156,504 shares offered hereby, (ii) 400,000
shares which may be acquired at any time pursuant to options held by Merril L.
Littlewood, (iii) 250,000 shares issuable upon conversion of 50,000 shares of
Series B Preferred Stock which the Series B Preferred Stockholders have the
right to acquire at any time, (iv) 388,820 shares issuable upon exercise of
warrants held by North Star Capital, L.L.C., and (v) 666,666 shares issuable
upon conversion of 666,666 shares of Series C Preferred Stock which the Series
C Preferred Stockholders have the right to acquire at any time).
Percentage Beneficially Owned
Before Offering/After Offering (2)
Stockholder Name (1) # of Shares Owned
5%STOCKHOLDERS
Gaylord M. Karren 1,121,515 13.82% 13.02%
John M. Hopkins 1,121,515 13.82% 13.02%
Merril L. Littlewood (3) 402,734 4.96% 4.67%
Northstar Capital, L.L.C. (4) 388,820 4.79% 4.51%
DIRECTORS AND OFFICERS
Gaylord M. Karren 1,121,515 13.82% 13.02%
John M. Hopkins 1,121,515 13.82% 13.02%
William Thomas 89,618 1.10% 1.04%
Merril L. Littlewood (3) 402,734 4.96% 4.67%
Joel Karren 72,381 0.89% 0.84%
Ronald M. Karren 29,069 0.36% 0.34%
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James Stone 27,383 0.34% 0.32%
All executive officers and
directors as a group
(seven persons) 2,864,215 35.30% 33.25%
CONVERTING STOCKHOLDERS
Entrepreneurial Investors,
Ltd. (5) 1,500,000 18% 17%
Invest Linc Emerging
Growth Equity Fund I,
L.L.C. (6) 1,073,170 13% 12%
(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 of Common Stock for
which Mr. Littlewood holds options, and 2,734 shares owned outright. (4)
Includes 388,820 shares of Common Stock issuable upon exercise of warrants
exercisable prior to February 17, 2008, at $.50 per share. (5) Series B
Preferred Stockholders. Includes 250,000 shares of Common Stock issuable upon
conversion of 50,000 shares of Series B Preferred Stock which Entrepreneurial
Investors, Ltd. has the right to acquire at any time. The beneficial
interests in Entrepreneurial Investors, Ltd. are widely held, and are held
entirely by European investors. See "Description of Securities--Preferred
Stock Conversion." (6) Series C Preferred Stockholders. Includes options to
acquire 666,666 shares of Series C Preferred Stock which is convertible into
Common Stock on a share for share basis. The beneficial owners of Invest Linc
Emerging Growth Equity Fund I, L.L.C. are Napili Capital Ventures, Inc., Maui
Ventures, Inc. and Makena Cove, Inc. 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.
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 50% of the total voting
rights can elect all of the directors of Venturi.
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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 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, and the common
stock is not subject to any 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 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
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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 $.001 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.
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.
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
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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 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.
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Each holder of Series A Preferred Stock 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 stock
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.
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.
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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. If the
holders of the Series B Preferred Stock elect to convert their 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 holders of Series B Preferred Stock will be given the opportunity to
convert their Preferred Stock into Common Stock. If all of them elect to do
so, there will be no shares of Series B Preferred Stock outstanding following
completion of the Offering.
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. There are
406,504 shares of Series C Preferred Stock currently 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) (the
"Fund"). These entities paid $2.05 per share for the Series C Preferred
Stock. The Fund initially purchased 121,951 shares of Series C Preferred
Stock, and was granted an option to acquire up to 414,634 additional shares
of Series C Preferred Stock before December 31, 1998; and an option to
acquire an additional 536,585 shares of the Series C Preferred Stock within
the next 5 years. For every two shares of Series C Preferred Stock purchased
by the Fund, CDL Capital Corp. 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 of Directors, 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.
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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 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 this Offering, the holders of the Series B Preferred Stock, and the
Series C Preferred Stock will be given the opportunity to convert their shares
of Preferred Stock and surrender their accumulated rights to dividends to
Venturi in consideration of the issuance by Venturi of Common Stock being
registered in this Offering. Any Common Stock issued to the holders of
Preferred Stock will be freely tradeable; however, Venturi intends to request
that all converting Stockholders agree not to resell their shares for 90 days
following the Offering. Because the holders of the Preferred Stock will
collectively own 30% 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". If converted, the Series B
Preferred Stock would have an effective cost per share of $1.60 and the Series
C Preferred Stock would have an effective cost per share of $2.05. The
holders of the Series B and Series C Preferred Stock may be affiliates of
Venturi and, as such, subject to the restrictions of Rule 144, including the
limitations on the number of shares which they may sell. See "Shares Eligible
For Future Sale."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offer and sale of the shares offered hereby, Venturi
will have outstanding 6,909,308 shares of Common Stock. With certain
exceptions, 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 M. Karren and John M. 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 daily trading volume of at least 15,000 shares. In that case,
up to 1,000 shares of Common Stock may be released from the
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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 daily trading volume of at least 15,000
shares.
In general, under Rule 144 as currently in effect, any affiliate of Venturi
(such as the holders of the Series B and Series C Preferred Stock) 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.
Affiliates of Venturi who elect to convert their Venturi Preferred Stock and
receive registered Common Stock in the Offering are subject to the above
restrictions of Rule 144, including the volume limitations of Rule 144, but
are entitled to sell immediately into the open market without having
beneficially owned such shares for one year. However, in connection with any
such resales into the open market, such affiliates may be deemed to be
underwriters engaged in a distribution and therefore subject to compliance
with the prospectus delivery requirements and other provisions of the
Securities Act of 1933 applicable to underwriters. Non-affiliates
of Venturi who have held their restricted shares for two years 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 active 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, 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
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Venturi is offering to sell, on a best efforts, no minimum, basis, up to
500,000 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 M. 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 Gaylord M. Karren, CEO of Venturi; and from Joe Fox, Venturi's
Stockholder Relations Coordinator.
No compensation related to sales of shares will be paid to any employees of
Venturi.
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.
333-60491) 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 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
42
<PAGE>
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.
43
<PAGE>
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-6
3. Venturi Technologies, Inc.
Audited Consolidated Financial Statements
Years Ended December 31, 1997 and 1996
with Report of Independent Auditors . . . . . . . . . . .F-8
F-1
<PAGE>
Venturi Technologies, Inc.
Unaudited Consolidated Income Statement
Six Months Ended June 30, 1998
REVENUES:
Carpet and Restoration 2,203,718.11
Customer Refunds - 1,899.55
TOTAL REVENUES 2,201,816.56
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 88,209.57
Salaries 572,472.68
Management Fees 95,478.48
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 142,879.53
Chemicals 6,825.64
Marketing/Promotion 140,476.99
Advertising 57,247.27
Office Supplies 18,929.57
Utilities 32,587.02
Pagers/Radios 14,972.36
Uniforms 9,247.64
Rent 105,696.09
Telephone 89,116.41
Payroll Taxes 55,045.45
Insurance 98,904.98
Vehicle Lease 2,739.26
Property Taxes 7,546.04
Freight 15,412.73
Auto Licensing 8,167.51
F-2
<PAGE>
Leased Equipment 2,638.58
Dues & Subscriptions 4,868.28
Bank Charges 8,807.27
Interest 49,512.56
Commissions 7,895.66
Accounting Fees 29,479.10
Amortization 6,605.45
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
Operating Costs of Video-Air 245,862.50
Operating Costs of All Valley 132,387.45
Miscellaneous 4,567.00
Depreciation 120,202.40
TOTAL OPERATING EXPENSES 2,461,396.29
NET LOSS $(1,198,330.94)
F-3
<PAGE>
The following table presents the financial impact of the three
acquisitions consummated in 1998 on Venturi's December 31, 1997
and June 30 1998 financial statements:
Protech % Complete % Video Aire % 12/31/97
Carpet Care Venturi
Total Assets
(Net of $95,994 10% $47,216 5% $139,543 14% $994,895
Depreciation)
No. of Shares 4,000 .01% 7,500 0.1% 96,000 1.4% 6,641,306
Net Income
(Loss) $14,714 48,662 60,715 (3,162,453)
Investment
from Venturi $5,600 .56% 14,000 1.4% $0 0% $994,895
Acquisition
Date 3/31/98 4/30/98 6/27/98
All 6/30/98
Valley % Dirt Free % Venturi
Total Assets
(Net of $25,143 3% $129,172 13% $994,895
No. of Shares 5,000 0% 52,632 1% 6,641,306
Net Income
(Loss) $41,694 $80,694 $(3,162,453)
Investment
from Venturi $8,400 1% 2,800 0% $994,985
Acquisition
Date 7/3/98 8/14/98
None of the acquisitions individually or in the aggregate exceeds
the thresholds established for presentation of separate financial
statements for the acquired companies. Therefore, financial
statements for the acquired companies have not been presented.
Venturi is engaged in ongoing negotiations for acquisitions of
assets of other carpet cleaning companies.
F-4
<PAGE>
Venturi Technologies, Inc.
Unaudited Consolidated Balance Sheet
Six Months Ended June 30, 1998
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
F-5
<PAGE>
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
F-6
<PAGE>
VENTURI TECHNOLOGIES, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
WITH REPORT OF INDEPENDENT AUDITORS
F-7
<PAGE>
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-8
<PAGE>
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.
/s/ Child & Company
May 19, 1998
F-9
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
December 31
1997 1996
ASSETS (Restated - Note J)
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
F-10
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31
1997 1996
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
F-11
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock Additional Retained
Common Stock (Series A & B) Subscription Paid-in Earnings
Shares Amount Shares Amount Receivable Capital (deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1996 1,818,583 $1,818 - $ - $ - $229,821 $(426,446) (194,807)
Common stock issued
for cash 63,169 63 - - - 129,285 - 129,348
Common stock issued
in lieu of interest 700,866 701 - - - 96,745 - 97,446
Preferred stock issued
for cash - - 38,850 38 - 388,462 - 388,500
Preferred stock issued
for services - - 710 1 - 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 2,582,618 2,582 39,560 39 - 851,412 (1,584,708) (730,675)
Common stock issued
for cash 1,830,268 1,830 - - - 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. 42,235 42 - - - 151,894 - 151,936
Preferred stock issued
for cash - - 198,850 199 (870,000) 1,118,301 - 248,500
Preferred stock issued
for services and fees - - 31,000 31 - 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 4,455,121 $4,454 269,410 $269 $(70,000) $4,511,690 $ (4,801,971)$(1,155,558)
</TABLE>
F-12
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
1997 1996
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
F-13
<PAGE>
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 Action Venturi Technologies, Inc., a Texas corporation
(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-14
<PAGE>
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:
Revenues $ 864,198
Net Loss $ 108,165
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-15
<PAGE>
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-16
<PAGE>
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-17
<PAGE>
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
C. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Net Carrying Value Note Balance at Note Balance at
of Collateral December 31, 1997 December 31, 1996
Notes payable to shareholders, (Restated - Note J)
interest from 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
F-18
<PAGE>
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
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:
1998 199,806
1999 117,478
2000 5,610
322,894
Less amounts representing interest 16,865
Principal payments $ 306,029
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 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-19
<PAGE>
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-20
<PAGE>
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-21
<PAGE>
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:
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
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-22
<PAGE>
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:
Current Deferred Total
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)
Components of deferred tax expense (benefit) consists of:
Year Ended December 31
1997 1996
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)
F-23
<PAGE>
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:
Year Ended December 31
1997 1996
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)
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 $.50 per share.
F-24
<PAGE>
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 $20.00 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 Non-Voting 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-25
<PAGE>
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-26
<PAGE>
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]
2,156,504 SHARES OF COMMON STOCK
PROSPECTUS
October 16, 1998
<PAGE>
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 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.
(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
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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
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
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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.
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
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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:
SEC Registration Fee $ 2,000
Blue Sky fees and expenses $ 3,000
Printing expenses $10,000
Legal fees and expenses $70,000
Accounting fees and expenses $10,000
Miscellaneous $ 5,000
Total $100,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, Venturi (or its predecessor) has conducted
three private offerings of common stock and three private offerings of
preferred stock. Venturi has also issued common stock as consideration
for the acquisition of the assets of various carpet cleaning businesses in
the past three years. In addition, Venturi has issued a number of shares
of common stock to employees and vendors.
Details regarding these offerings are as follows:
A. Between January 1997 and September 1997, Venturi sold a total of
64,410 shares of Series A Preferred Stock for $10.00 cash per
share in a private offering primarily to accredited investors in
reliance upon Rules 505 and 506 under the Securities Act of
1933. Dominion Capital Corporation of Dallas, Texas was
employed by Venturi as Soliciting Agent in the offering. All
prospective investors were given a private placement memorandum
that included a complete disclosure of Venturi, its financial
results, its business and various risks of the investment.
Investors were required to sign a Subscription Agreement in
which the investor represented, among other things, that he or
she was acquiring the shares for his or her own account, and not
for resale, and that the investor was experienced in financial
matters and could bear the economic risk of an investment in
Venturi. Following is a list of investors in this offering:
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SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
Series A Preferred Don & Katherine Halsey Trust $12,500/$10.00 per share
Henry Ross IRA $35,000/"
Pete & Angie Danna $20,000/"
John Towers $2,500/"
Carroll Kennedy Burgess IRA $25,000/"
Theodore Tuinstra $10,000/"
Leo Smith IRA $15,000/"
Mary Kirk Trust $10,000/"
Jerry & Mai Hamilton Trust $10,000/"
Robert Davidson $25,000/"
Doug Rhone Trust $25,000/"
Marjorie McCray $35,000/"
J. Moyle $30,000/"
David Sartain IRA $12,500/"
Clyde Webb $25,000/"
Edward J. Gallatin IRA $25,000/"
Vikki Minadeo $25,000/"
Wayne Farlow IRA $21,000/"
Bill Sass $25,000/"
Raymond Earl Sloan IRA $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. IRA $25,000/"
George & Frances Tyler $15,000/"
Suelema M. Roman $25,000/"
Jack J. Stephens $13,000/"
Mickey Long $12,500/"
George R. Tyler IRA $15,000/"
Sandi Kinney $13,000/"
Bruce Axtell $25,000/"
A. Ken Flake $ 7,100/"
B. Beginning in January 1998 Venturi offered up to 315,000 shares
of Series B Preferred Stock to accredited investors only in
reliance upon Rule 506 and Regulation S under the Securities Act
of 1933. In January 1998, 200,000 shares of Series B Preferred
Stock was sold to Entrepreneurial Investors, Ltd., an accredited
investor which is located offshore, for $5.00 cash per share.
In April 1998, an additional 50,000 shares of Series B Preferred
Stock was sold to Entrepreneurial Investors, Ltd. for $20.00 per
share. Venturi employed no brokers or underwriters in the
offering, although Equity Services, Ltd. was employed as a
Placement Agent. 10,000 shares of Series B Preferred Stock was
paid to Equity Services, Ltd. in payment for service as
placement agent. Following is a list of investors in this
offering:
SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
Series B Preferred Entrepreneurial Investors, Ltd. $2,000,000
Equity Services, Ltd. Services
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C. Beginning in February 1998 the Company has offered up to
1,609,756 shares of Series C Preferred Stock to accredited
investors in reliance upon Rule 506 under the Securities Act of
1933. Between February 1998 and September 1998, a total of
406,504 shares had been sold to Invest Linc Emerging Growth
Equity Fund I, L.L.C., a Nevada limited liability company
(formerly known as CDL Emerging Growth Equity Fund), for a total
of $833,334 cash. No brokers or underwriters were employed by
the Company in the offering. Following is a list of investors
in this offering:
SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
Series C Preferred Invest Linc Emerging Growth
Equity Fund I, L.L.C. $833,334
D. Between August 1994 and June 1997, Venturi sold a total of
212,505 shares of common stock for $2.40 cash per share in a
private offering in reliance upon Rules 505 and 506 under the
Securities Act of 1933, and Section 4(2) of the Securities Act
of 1933, primarily to individuals with a pre-existing
relationship with Venturi or its founders. Venturi used no
underwriter or brokers in the offering. Although the offering
was open to accredited and unaccredited investors, no more than
35 unaccredited investors purchased shares in the offering. All
prospective investors were given a private placement memorandum
that included a complete disclosure of Venturi, its financial
results, its business and various risks of the investment.
Investors were required to sign a Subscription Agreement in
which each investor represented, among other things, that he or
she was acquiring the shares for his or her own account, and not
for resale, and that the investor was experienced in financial
matters and could bear the economic risk of an investment in
Venturi. Following is a list of investors in this offering:
SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
Common Stock Dean Schafer $23,700
Mary Loiuse Hopkins $12,000
John Branscom $4,000
T. Blake Horrocks $24,000
Merril Littlewood $6,000
David Frey $18,000
Bonnie & Leo Smith $6,000
Ron & Leslie Rutledge $4,000
Rebecca Stahle $1,500
Aaron & Tami Pyfer $2,400
Kevin Pyfer $24,000
HPKK Family Trust $5,040
Claudeen Hill $8,208
Ronald Karren $42,075
American Pension Services
Custodian Ronald Karren $7,925
Alan Bingham $1,200
Bruce Axtell $185,000
Bryan Karren $1,500
Kevin Karren $1,000
Julie Karren $375
Darrell Karren $375
Leslie Ann Karren $375
Tim Woodard $1,500
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Thomas Williams $5,000
The Priority Group $50,000
William Moore $12,000
Ray Lynn Jorgensen $1,500
Gregg Anderson $11,000
Scott Farrer $15,000
E. Between July 1997 and August 1998, Venturi sold a total of
88,409 shares of common stock for $3.50 cash per share in a
private offering to accredited and unaccredited investors in
reliance upon Rules 505 and 506 under the Securities Act of
1933. Each share of Common Stock sold in the offering was
accompanied by a warrant entitling the holder to purchase an
additional share of common stock for $6.00. Venturi used no
underwriter or brokers in the offering. Although the offering
was open to accredited and unaccredited investors, no more than
35 unaccredited investors purchased shares in the offering. All
prospective investors were given a private placement memorandum
that included a complete disclosure of Venturi, its financial
results, its business and various risks of the investment.
Investors were required to sign a Subscription Agreement in
which the investor represented, among other things, that he or
she was acquiring the shares for his or her own account, and not
for resale, and that the investor was experienced in financial
matters and could bear the economic risk of an investment in
Venturi. Following is a list of investors in this offering:
SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
Common Stock
Common Stock
Warrants 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
Brent Higginson $2,100
Jim & Patrice Stone $10,000
Ned Karren $3,500
Floyd & Patricia Fox $4,000
Joe Fox $58,717
Louis Sacco $21,000
Benjamin Press $35,000
J.T. Weber
Mark Cripe $1,015
Robert E. Fellows $3,500
Margo Murphy $3,500
Doran Pratte $10,000
Cless Karren $5,005
Dawn Baker $1,050
Kardell & Sandra Schmidt
Lou Sacco $10,500
Doug Zibriskie $2,000
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Reed Buley $10,000
Floyd & Patricia Fox $4,000
Darin Yancey $2,500
Marvin Yancey $10,000
Mike Cox $4,500
F. In December 1997, Venturi issued a total of 33,982 shares of its
common stock to its employees in reliance upon Rule 701 and a
written contract pursuant thereto. The following employees
received the indicated shares in this transaction:
SECURITIES ISSUED NAME OF EMPLOYEE NUMBER OF SHARES RECEIVED
Common Stock Jason Barker 86
Robert Barnes 343
Kevin Campbell 57
Keith Hexem 752
Tom Jensen 853
Jeremy Marini 274
Jim Stone 1481
Chad Taylor 514
Marlane Wright 690
Doug Zibriskie 1143
Jamie Zuniga 86
Dale Karren 646
Jaime Robles 457
Raul Robles 457
Leslie Rutledge 211
Bill Thomas 971
Bridge Whitmire 402
Tim Woodward 874
Blake Horrocks 1466
Brandon Horrocks 1006
Marsan Horrocks 486
Derrick Paper 406
Susan Rittman 655
Debbie Taylor 796
Eric Iverson 316
Jerry Thomas 786
John Hawkes 271
Vicki Johnson 618
Bo Hopkins 137
Kevin Karren 843
Joel Karren 581
Ed Norton 1286
Randy Norton 205
Brandon Paris 114
Nate Robins 146
John Hopkins 4572
Gaylord Karren 4572
Shane Karren 137
Ron Karren 4286
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G. In August 1998, Venturi offered a total of 600,000 shares of
common stock to various offshore residents for $2.00 per share
in an offering exempt from registration under Regulation S
promulgated under the Securities Act of 1933. As of September
23, 1998, a total of 75,000 shares of common stock had been sold
in this offering, for cash consideration in the amount of
$150,000. All investors in the offering signed a Subscription
Agreement in which they represented that they were not residents
of the United States, and that they did not purchase the shares
with the intent that they would eventually come to rest in the
United States. No underwriters or brokers were employed in the
offering, although Equity Services, Ltd., a Nevis company, acted
as a placement agent in the offering. Following is a list of
investors, to date, in this offering:
SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
Common Stock
Aspen Investments 12,500 $25,000
Peninsula Corp. 25,000 $50,000
Prism, Inc. 25,000 $50,000
Securitron, Ltd. 12,500 $25,000
H. In January 1997, Venturi issued 1,500,000 shares of common stock
to the following persons at $.10 per share (for aggregate
consideration of $150,000) without registration under Rule 504
adopted under Section 3(b) of the Securities Act of 1933, in
connection with its formation:
SECURITIES SOLD NAMES OF INVESTORS NUMBER OF SHARES PURCHASED
Common Stock Eileen Albertson 2,000
Autumn Leaf, Inc. 120,000
Battle of Midway Incorporated 112,000
J.C. Blanleil 2,000
Rachael A. Burton 2,000
Mary Ann Coleman 2,000
Delta Financial Resources Inc. 210,000
Diversified Lenders Inc. 210,000
Gayle Dorsey 2,000
Ronald L. Drake 2,500
Marci Evans 2,000
Darlene Fawcett 2,000
Kris Gornichec 200,000
Emil Gulbranson 2,000
Melville K. Gulbranson 20,000
Rebecca Gulbranson 2,000
Kerri Heavenor 2,000
Betty Hurtado 2,000
Dixie Hutchins 2,000
Garth P. Jarman 2,000
Bryan L. Jeffery 1,000
Wydell, Jeffery 2,000
Jana Jensen 2,000
Jacob D. Klassen 2,000
Linda Klassen 2,000
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John J. Kochel 2,000
Mark Larson 1,000
Roslyn Mackay 2,000
Mary Magouirk 1,000
Renetta Mecham 2,000
MK Resources, Inc. 5,000
Tracy J. Nelson 2,000
Suzanne Pancheri 1,000
Freddie C. Roberts, Jr. 3,000
Karen Roberts 1,000
Janis & David R. Rowberry 1,000
Lise-Lotte Ruzicka 1,000
Nancy Smithanik 2,000
Symmetry Inc. 100,000
Jeffery Clark Tanner 200,000
Max C. Tanner 50,000
Mont E. Tanner 204,000
Renee Tieman 2,000
C. F. Walker 4,500
Gordon J. Weaver 2,000
Kimberly Witter 2,000
Monica Young 2,000
1,500,000
I. Over the past three years, Venturi issued or agreed to issue
upon expiration of rescission rights under applicable
acquisition agreements 371,434 shares of common stock to various
persons in exchange for all of the assets of their companies or
businesses in reliance upon Section 4(2) of the Securities Act
of 1933. The sellers were given a copy of the Company's current
business plan and were provided with the opportunity to
investigate the Company in as much detail as they desired. The
sellers represented in the Asset Purchase Agreement in
connection with the sale that they were acquiring the shares for
investment and not for resale, and the shares so issued
contained a restrictive legend consistent with the fact that
neither the shares nor the transaction was registered. Persons
to whom stock was issued in connection with acquisitions are as
follows:
Erie Dekker 50,122
Jerry Thomas 10,936
William Thomas 60,147
Jim Riley 54,679
Alvin Childers 44
Doug Gilbert 2,187
June Thomas 2,187
Jim & Patrice Stone 22,000
Protech Carpet 4,000
Complete Carpet Care 7,500
Danny Levine 5,000
Video-Aire 96,000
Dirt Free 52,632
Disaster Plus 4,000
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J. During the past three years, Venturi has issued common stock to
various parties as consideration for extension of credit and
forbearance in receiving payment for services rendered in
reliance upon Section 4(2) of the Securities Act of 1933. Each
party was given a copy of Venturi's current business plan and
the opportunity to investigate Venturi. Those persons and the
amount of stock issued are as follows:
SECURITIES ISSUED NAMES OF RECIPIENTS NUMBER OF SHARES ISSUED
Common Stock The Priority Group 14,286
Riverbottom Hollow 7,000
The Priority Group 14,285
Joe Bye 5,000
Bill Maxwell 3,600
Jim Stone 10,000
Joe Bye 1,500
Kirby Cochran 750
Bill Davidson 750
Sentry Financial 15,622
Bill Davidson 109,359
Capital Solutions 150,000
L. G. Rose 5,000
NAIC Investor 5
Danny Hepler 5
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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 7-1-97
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 Primicide, 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
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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
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
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<PAGE>
10.34 Letter of Intent re: Proposed Acquisition of Duct Cleaning
Business of Bob L. Allen dated 7-29-98
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
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 stockholders 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.
10.44 Consent of Combustion Resources, L.L.C. dated September 29, 1988
10.45 Agreement of Purchase and Sale of Assets dated as of August
14, 1998 re Dirt Free Carpet and Upholstery Cleaning, Inc.
10.46 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking dated as of August 14, 1998
10.47 Employment Agreement with Robert Bleyl dated October 5, 1998
10.48 Employment Agreement with David J. Bleyl dated October 5, 1998
10.49 Agreement of Purchase and Sale of Assets dated as of October
5, 1998 with Disaster Plus Corp., Robert D. Bleyl and David J.
Bleyl
21.0 Subsidiaries of Venturi Technologies, Inc.
23.0 Consent of Mackey Price & Williams dated September 29, 1998
23.1 Consent of Independent Accountants dated September 29, 1998
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),
II-15
<PAGE>
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.
(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-16
<PAGE>
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
Amendment No. One to registration statement to be signed on its behalf by
the undersigned, in the City of Orem, Utah, as of the 30th day of
September, 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.
SIGNATURE TITLE DATE
Chairman of the Board 9/29/98
/s/ Gaylord Karren ChiefExecutive Officer and Director
/s/ John Hopkins President and Director 9/29/98
/s/ Merril L. Littlewood Chief Financial Officer 9/29/98
and Treasurer
/s/ Kim Peterson Controller 9/29/98
II-17
<PAGE>
NON-COMPETITION, CONFIDENTIALITY AND
CONTINUITY OF BUSINESS DEALINGS
UNDERTAKING
This NON-COMPETITION, CONFIDENTIALITY AND CONTINUITY OF
BUSINESS DEALINGS UNDERTAKING dated effective August 14, 1998 by
Aubry Thoede, whose address is 3505 So. Dairy Ashford, Suite 251,
Houston, Texas 77082 (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 August 14,
1998 (the "Agreement"), and a License Agreement dated effective
as of August 14, 1998, with Seller pursuant to which the Company
purchased or licensed and the Seller sold or licensed,
substantially 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 Seller
to compete against the Company or disclose the Company's
confidential information are restricted so as to protect the
Company's proprietary rights and interests upon the expiration of
the ninety (90) day recission period in the Agreement and upon
payment of $150,000.00 cash by the Company.
NOW, THEREFORE, in consideration of the payment of
$150,000.00 cash 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, in the Houston, Texas
metropolitan area 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 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 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 it is information that Seller had prior to
the time Seller entered into negotiations with the Company
leading up to the Closing of the transaction contemplated in
the Agreement, or if it is information that 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.
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:
/s/ Aubry Theode
Aubry Thoede
LICENSE AGREEMENT
This LICENSE AGREEMENT (hereinafter the "Agreement'), is made
and entered into effective as of the ____ day of _________, 1998, by and
among Dirt Free Carpet & Upholstery Cleaning, Inc., a Texas corporation
("DFC") and Aubry Thoede ("Thoede") (DFC and Thoede are collectively
referred to herein as "Licensors" and are referred to singly as a "Licensor"),
and Venturi Technologies, Inc., a Nevada corporation ("Venturi").
RECITALS
WHEREAS, Licensors represent that they are the owners of the name
"Dirt Free" (the "Name") and of the business telephone number (281) 487-6075
(the "Number"), and that they have generated significant good will with
the name and the telephone number;
WHEREAS, as of the date hereof, the parties have entered into an
Agreement for the Sale and Purchase of Assets, pursuant to which Licensors
are selling substantially all of their carpet cleaning business assets to
Venturi, and in conjunction with that sale Licensors have agreed to license
the Name and the Number to Venturi;
WHEREAS, Licensors desire to grant to Venturi an exclusive license
to the Name and to the Number in connection with the sale of business assets
to Venturi, and Venturi desires to obtain such an exclusive license from
Licensors.
NOW THEREFORE, in consideration of the foregoing, and the
promises, representations and mutual covenants contained herein, the parties
hereto agree as follows:
1. Grant of Exclusive License. Licensors hereby grant to
Venturi a worldwide, exclusive license to use the Name and the Number (the
"License"). The License shall cover any and all types of uses, including, but
not limited to, the marketing and sale of services on a worldwide basis. By
virtue of this exclusive License, even the Licensors are not entitled to use
the Name or the Number, except as authorized pursuant to the terms of this
Agreement or related agreements or upon the written authorization or
permission of Venturi.
2. Enforcement. As exclusive licensee, Venturi shall have
power to institute and prosecute, at its own cost and expense, suits for
infringement of the Name, and Licensors shall, if required by law or requested
by Venturi, join as party plaintiff in any such action. Licensors shall give
to Venturi any necessary powers of attorney that may be necessary to maintain,
defend, protect and prosecute its rights to the Name and any and all
violations or infringements on same. In the event Licensor does not
undertake any action to protect the Name, Licensor shall have such rights.
3. Term and Termination. This Agreement will commence on
the date hereof and remain in effect for a period of one (1) year after
Thoede's employment by Venturi is terminated for any reason. Upon
expiration of this Agreement, Venturi shall cease using the Name and the
Number, and all rights to use the Name and the Number shall revert to
Licensors.
4. Consideration. The parties acknowledge that the
consideration for this Agreement is the Venturi common stock issued to
Licensors in connection with Venturi's acquisition of the Licensors' business
assets, and that such consideration has been received and is sufficient. No
further consideration or royalties shall be paid to Licensors for the rights
granted to Venturi under this Agreement.
5. Representations and Warranties.
5.1 Licensors represent and warrant that they own the Name
and the right to use the Name, and that they have been using the Name since
at least _______________, 19__, and that they have legal power to extend the
rights granted to Venturi in this Agreement and that they have not made, and
will not make, any commitments to others inconsistent with or in derogation
of such rights.
5.2 Licensors represent and warrant that there are no trademark
or tradename infringement suits or asserted infringement claims pertaining to
the Name as of the date of this Agreement.
5.3 Venturi represents and warrants that this Agreement and
the obligations of the parties hereunder are valid and enforceable under the
laws of the State of Utah.
6. Miscellaneous.
6.1 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.
6.2 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.
6.3 This Agreement shall be binding upon and inure to the
benefit of each corporate party hereto, its successors and permitted assigns,
and each individual party hereto and his heirs, personal representatives,
successors and assigns. Neither party may assign any interest in this
Agreement without the prior written consent of the other.
6.4 The paragraph headings contain herein are for the purposes
of convenience only and are not intended to define or limit the contents of
said paragraphs.
6.5 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.
6.6 This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
6.7 This Agreement and all amendments hereto shall be
governed by and construed in accordance with law of the State of Utah
applicable to contracts made and to be performed therein, and any disputes
with respect to this Agreement shall be determined in the courts of the State
of Utah.
6.8 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.
LICENSORS:
DIRT FREE CARPET &
UPHOLSTERY CLEANING,
INC., a Texas corporation
By:
Its:
Aubry Thoede
LICENSEE:
VENTURI TECHNOLOGIES,INC.
By:
Its:
BILL OF SALE AND ASSIGNMENT
Aubry Thoede, an individual who owns all of the
outstanding stock of Dirt Free Carpet & Upholstery
Cleaning, Inc., a Texas corporation, and who owns certain
tangible and intangible assets used in the carpet cleaning
business conducted by Dirt Free Carpet & Upholstery
Cleaning, Inc., (Aubry Thoede is hereinafter referred to
as the "Assignor"), for One Dollar ($1.00) and other
valuable consideration, receipt of which is hereby
acknowledged, by these presents does sell, assign,
transfer and convey unto Venturi Technologies, 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, which are
used in the carpet cleaning business conducted
by Dirt Free Carpet & Upholstery Cleaning,
Inc., excepting only those properties of
Assignor listed on Schedule "A" annexed hereto
or covered by the License Agreement between the
parties 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 ___________ , 1998 between
Assignor as Seller and Assignee as Purchaser
(the "Agreement"), which includes, without
limitation, the following:
(i) All fixed assets including, without
limitation, leaseholds and leasehold
improvements, fixtures, machinery, tools,
equipment, cars and trucks;
(ii) All books and records of Assignor
relating to the carpet cleaning business
conducted by Dirt Free Carpet & Upholstery
Cleaning, Inc.;
(iii) All contracts, agreements and
understandings to which Assignor is a party or by
which Assignor may have any rights or obligations
relating to the carpet cleaning business conducted by
Dirt Free Carpet & Upholstery Cleaning, Inc., subject
to the terms thereof; and
(iv) 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, as they relate to the carpet
cleaning business conducted by Dirt Free Carpet &
Upholstery Cleaning, Inc.
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, subject to any other
agreements between the parties hereto.
AND, Assignor does hereby warrant, covenant and agree
that he:
(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 ___ day of
_________, 1998.
ASSIGNOR:
Aubry Thoede
ASSIGNEE:
VENTURI TECHNOLOGIES,
INC.
a Nevada corporation
By:
Its:
SCHEDULE "A"
(To Bill of Sale and Assignment)
Excluded Property and Assets
BILL OF SALE AND ASSIGNMENT
Dirt Free Carpet & Upholstery Cleaning, Inc., a Texas
corporation (hereinafter collectively called "Assignor"), for
One Dollar ($1.00) and other valuable consideration, receipt of
which is hereby acknowledged, by these presents does sell,
assign, transfer and convey unto Venturi Technologies, 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 or
covered by the License Agreement between the parties
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 ___________
, 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 Books and records of Assignor;
(iv) All contracts, agreements and understandings
to which Assignor is a party or by which Assignor may
have any rights or obligations, subject to the terms
therof; and
(v) 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.
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, subject to any other agreements
between the parties hereto.
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 ___ day of _________, 1998.
ASSIGNOR:
DIRT FREE CARPET & UPHOLSTERY
CLEANING, INC., a Texas
corporation
By:
Its:
ASSIGNEE:
VENTURI TECHNOLOGIES, INC.
a Nevada corporation
By:
Its:
SCHEDULE "A"
(To Bill of Sale and Assignment)
Excluded Property and Assets
BILL OF SALE AND ASSIGNMENT
Dirt Free Carpet & Upholstery Cleaning, Inc., a Texas
corporation (hereinafter collectively called "Assignor"), for
One Dollar ($1.00) and other valuable consideration, receipt of
which is hereby acknowledged, by these presents does sell,
assign, transfer and convey unto Venturi Technologies, 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 or
covered by the License Agreement between the parties
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 ___________
, 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 Books and records of Assignor;
(iv) All contracts, agreements and understandings
to which Assignor is a party or by which Assignor may
have any rights or obligations, subject to the terms
therof; and
(v) 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.
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, subject to any other agreements
between the parties hereto.
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 ___ day of _________, 1998.
ASSIGNOR:
DIRT FREE CARPET & UPHOLSTERY
CLEANING, INC., a Texas
corporation
By:
Its:
ASSIGNEE:
VENTURI TECHNOLOGIES, INC.
a Nevada corporation
By:
Its:
SCHEDULE "A"
(To Bill of Sale and Assignment)
Excluded Property and Assets
NON-COMPETITION, CONFIDENTIALITY AND
CONTINUITY OF BUSINESS DEALINGS
UNDERTAKING
This NON-COMPETITION, CONFIDENTIALITY AND CONTINUITY
OF BUSINESS DEALINGS UNDERTAKING dated effective October
5, 1998 by Robert D. Bleyl, whose address is 960 East 155
South, Lindon, Utah 84042 (hereinafter called the
"Seller"), in favor of VENTURI TECHNOLOGIES, 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
October 5, 1998 (the "Agreement"), with Seller and
Disaster Plus Corp. pursuant to which the Company
purchased and Disaster Plus Corp. sold, substantially all
of Disaster Plus Corp.'s business, assets, properties,
goodwill and (the "Seller's Assets"); and
WHEREAS, the Agreement requires that Seller execute
and deliver this Undertaking pursuant to which the rights
of Seller to compete against the Company or disclose the
Company's confidential information are restricted so as
to protect the Company's proprietary rights and
interests.
NOW, THEREFORE, in consideration of the covenants
set forth herein and in the Agreement, 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 in
which Purchaser is doing business, 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 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 it is information that Seller had prior to the
time Seller entered into negotiations with the
Company leading up to the Closing of the transaction
contemplated in the Agreement, or if it is
information that 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.
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:
s/
Robert D. Bleyl
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is
entered into as of the 5th day of October, 1998, by and
between Disaster Plus Corp., a Texas corporation having
its principal place of business at 960 East 155 South,
Lindon, Utah 84042 ("Disaster Plus"), Robert D. Bleyl and
David J. Blyel, the owners of Disaster Plus and the
owners of certain assets used by Disaster Plus in the
carpet cleaning business, having offices at 960 East 155
South, Lindon, Utah 84042 ("Blyels") (Disaster Plus and
Blyles are sometimes collectively referred to as
"Sellers"), and Venturi Technologies, Inc., a Nevada
corporation, having its principal office at 1327 North
State Street, Orem, Utah 84057 ("Purchaser").
WHEREAS, Sellers own and operate a carpet and
upholstery cleaning business located in Utah County,
Utah;
WHEREAS, Purchaser desires to purchase from Sellers,
and Sellers desire to sell to Purchaser the Sellers'
Assets used in, and connected with, the Sellers' carpet
cleaning 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. Sellers shall
sell to Purchaser, and Purchaser shall purchase from
Sellers all of Sellers' interest in all the business
assets, goodwill and rights owned by Sellers and used in
the operation of Sellers' business ("Sellers' Assets"),
including (i) the right to use Sellers' business name,
(ii) the assets listed in the Bills of Sale and
Assignments attached as Exhibits "A-1" and "A-2," and
(iii) the assets listed on the Balance Sheet described in
Section 5.3, except for assets disposed of in the
ordinary course of Sellers' business between the Balance
Sheet Date and the Closing Date. Sellers shall transfer
Sellers' Assets free and clear of all liabilities and
liens except as provided by this Agreement.
2. Payment For Sellers' Assets.
2.1 Stock for Sellers' Assets. As full payment for
Sellers' Assets, Purchaser shall, at the Closing, cause
to be issued to Sellers, in such proportions as directed
by Sellers, a total of four thousand (4,000) shares of
Purchaser's $.001 par value common stock (the "Shares").
2.2 Restricted Stock. The Shares issued to Sellers
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 Sellers 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 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.
Sellers represent the following to Purchaser in order to
establish exemptions from registration under Federal and
state securities laws. Seller are acquiring the Shares
for their own account, for investment, and not for resale
in connection with any distribution thereof. Sellers
have such knowledge and experience in business and
financial matters that they are capable of evaluating the
risks of obtaining the Shares. Sellers understand the
speculative nature of the Shares. Sellers have adequate
net worth and means to provide for their current needs
and to sustain a complete loss of their investment.
Sellers have no need of liquidity of their investment.
Sellers understand 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, Sellers 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
(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
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 (60) days after the Closing
Date, and it cannot occur later than ninety (90) 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, Sellers shall return the stock certificates
and shall assume the liabilities assumed by Purchaser on
behalf of Seller, and Purchaser shall return Sellers'
Assets (or their net value).
2.5 Consent to Dilution. Sellers understand 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. Sellers
understand and consent that future issuance of stock will
dilute Sellers' proportionate ownership of Purchaser.
2.6 Liabilities Undertaking. At the Closing
Purchaser shall sign a Liabilities Undertaking in the
form of the attached Exhibit "___," 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 5th day of October, 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
August 30, 1998.
4. Sellers' Obligations at Closing; Further
Assurances.
4.1 At the Closing, Sellers shall deliver to
Purchaser:
4.1.1 a cashier's or certified check
payable to Purchaser in the amount of Disaster
Plus' 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 Disaster
Plus agrees to keep enough money in the bank
for such checks to clear) or, at Purchaser's
option, an assignment of all of Disaster Plus'
bank accounts;
4.1.2 a Bill of Sale and Assignment signed
by Disaster Plus in the form attached as
Exhibit "A-1" and a Bill of Sale and Assignment
signed by Bleyls in the form attached as
Exhibit "A-2;"
4.1.3 any other instruments of assignment
and transfer necessary to vest in Purchaser
good and marketable title to Sellers' Assets;
4.1.4 all contracts and records relating
to Sellers' Assets; and
4.1.5 all documents required by this
Agreement.
4.2 At any time after the Closing, Purchaser may
request and Sellers must sign and/or deliver any
documents necessary to transfer and assign to Purchaser,
and confirm Purchaser's title to Sellers' Assets, and to
assist Purchaser in the exercise of all rights thereto.
After the Closing, Sellers 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 Sellers' name on checks received for such
receivables. Sellers shall transfer to Purchaser any
cash or other property Sellers receives for such
receivables.
4.4 Sellers 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 Sellers' Assets as set forth in Schedule
4.5.
5. Representations and Warranties by Sellers.
Sellers represent and warrant to Purchaser as follows:
5.1 Organization, Standing and Qualification.
Disaster Plus is a corporation duly organized, validly
existing and in good standing under the laws of the State
of Utah. Bleyls are individuals who own all of the
outstanding capital stock of Disaster Plus, and who may
own some of the assets used by Disaster Plus in Disaster
Plus' carpet cleaning business. Sellers have all
requisite corporate or other power and authority and are
entitled to carry on their respective businesses as now
being conducted and to own, lease or operate their
properties as and in the places where such businesses are
now conducted. Sellers are properly licensed to conduct
their respective businesses.
5.2 Execution and Performance of Agreement;
Authority. The performance of this Agreement by Sellers
will not result in a default or breach of any other
agreement to which Sellers are a party. Sellers have the
authority to enter into this Agreement.
5.3 Financial Statements. The copies of the
following financial statements given to Purchaser and
prepared by Sellers (called the "Financial Statements")
are complete and correct, have been prepared from the
records of Sellers in accordance with generally accepted
accounting principles and fairly present the financial
condition of Sellers as of their dates and the results of
its operations for the periods covered thereby:
5.3.1 an unaudited balance sheet of
Sellers (the "Balance Sheet") as of ________,
199__, (the "Balance Sheet Date") and Sellers'
unaudited income or cash flow statement for the
period ended __________, 199__.
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 Schedule 5.4 or on the Balance Sheet, as of
the Balance Sheet Date Sellers had no debts or
obligations of any nature whatsoever, including any tax
liabilities incurred in respect of Sellers' 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. Except as may be set forth on Schedule
5.5, all taxes and assessments imposed by any taxing
authority, whether federal, state, local, foreign or
otherwise which are due or payable by Sellers, 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 Sellers 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 Sellers, their employees, their
properties, or business or the transactions contemplated
by this Agreement, and Sellers knows of no basis for the
same.
5.8 Compliance With Laws and Other Instruments.
Except as set forth in Schedule 5.8, Sellers has complied
with all laws applicable to their business. The
ownership and use of Sellers' Assets as well as the
conduct of their business will not conflict with the
rights of any other person or entity, and will not cause
a default under any agreement to which Sellers are a
party. Sellers are not aware of any proposed laws,
condemnations or other proceedings which would affect
their business or Sellers' Assets.
5.9 Title to Properties. Sellers have good title
to Sellers' Assets. None of Sellers' 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. Sellers' 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) Sellers' business is being
operated in compliance with all environmental laws and
with all terms of required permits and licenses, (b)
Sellers are not aware of any circumstances that may
interfere with their 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 Sellers' manufacture, storage,
disposal, transport, or handling, or the release into the
environment, of any hazardous substance, (c) there is no
claim, investigation, or proceeding pending or threatened
against Seller, in connection with the Sellers' Assets or
their business relating to environmental laws, and (d)
Sellers currently maintains all material government
permits, licenses and agreements required to operate
Sellers' 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 Sellers
has any ownership or other interest and which
is used in connection with the operation of
their business.
5.11.2 As of a date no earlier than June
30, 1998, all of Sellers' 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 Sellers
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 Sellers or used in the operation of
Sellers' business.
5.11.5 All insurance policies insuring
Sellers or their 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 Sellers are a
party.
5.11.7 All loan agreements, conditional
sale agreements, security agreements,
guaranties, and leases to which Sellers are 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 Sellers are
a party.
5.11.9 The name of all banks where
Sellers have 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 Sellers and a summary
of the terms thereof.
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 to 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 Sellers' Assets or business or
likely to result in any material loss or liability. None
of Sellers' existing or completed contracts is subject to
renegotiation with any government body.
5.12 No Guaranties. Except as may be set forth on
Schedule 5.12, no obligation of Sellers are guaranteed by
any other person or entity, nor has Sellers guaranteed
any obligation of any other person or entity.
5.13 Receivables. All Sellers' 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 Sellers 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
Sellers nor any employee or agent of Sellers 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 Sellers which (i) might subject Sellers to liability
in any proceeding, (ii) if not given in the past, might
have had an adverse effect on the Sellers' Assets or
business as reflected in the Financial Statements, or
(iii) if not continued in the future, might adversely
affect Sellers' Assets or business, or which might
subject Sellers to liability in any proceeding.
5.16 Disclosure. All of Sellers' representations
made in this Agreement and its related documents are true
and contain no untrue statements and do not omit
important facts. Sellers has disclosed to Purchaser in
writing all the adverse facts concerning the Sellers'
Assets and their business.
5.17 No Conflict. Except as may be set forth on
Schedule 5.17, performance of this Agreement by Sellers
will not conflict with any regulations or agreements to
which Sellers are a party. No authorization or filing,
which has not already been completed, is necessary for
Sellers to perform this Agreement.
6. Representations and Warranties by Purchaser.
Purchaser represents and warrants to Sellers 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 their business and to own and
operate their 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, Sellers shall conduct
their business only in a manner consistent with their
prior practice and shall preserve their assets and
properties in good condition and maintain insurance
thereon in accordance with present practices, and Sellers
will use their best efforts (i) to preserve the business
and organization of Sellers intact, (ii) to keep
available the services of Sellers' present employees,
agents and independent contractors, (iii) to preserve the
goodwill of Sellers' 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
Sellers 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, Sellers shall give Purchaser prompt
written notice.
7.3 Sellers shall consult with and follow the
recommendations of Purchaser with respect to (i)
canceling agreements to which Sellers are 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 Sellers 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 Sellers' business consistent with
prior practice, or to result in a breach by Sellers of
any of their representations contained in this Agreement
(unless the breach is waived by Purchaser).
8. Access to Information and Documents. Upon
Purchaser's request, Sellers shall give Purchaser access
to Sellers' personnel and all their properties, documents
and records and shall furnish copies of documents
requested by Purchaser. Purchaser shall not improperly
disclose the same prior to the Closing.
9. Employment Matters.
9.1 Purchaser intends to provide employment to as
many of Sellers' current employees as possible. Schedule
9.1 is a list of all Sellers' employees as of the date of
this Agreement, including the compensation for each
employee. Prior to the Closing Date, Purchaser shall
provide Sellers 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 Sellers' employees to enable them to use and sell
Purchaser's products and services.
10. Bulk Sales Compliance. Purchaser waives
Sellers' compliance with the Bulk Sales Law of any state.
Sellers 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. Sellers indemnify Purchaser
against any liability or expense, including attorneys'
fees, incurred by Purchaser by reason of the failure of
Sellers to pay such claims.
11. 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 Sellers shall
use their best efforts to cause each condition to be
fulfilled:
11.1 All representations of Sellers 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.
11.2 All duties required by this Agreement to be
performed by Sellers at or before the Closing shall be
performed.
11.3 Since the date of this Agreement there shall be
no material adverse change in the condition of Sellers'
Assets or their business.
11.4 All documents required to be delivered to
Purchaser at or prior to the Closing shall be delivered.
11.5 Sellers shall obtain written consents to the
transfer or assignment to Purchaser of all agreements of
Sellers where the consent of any other party may be
required.
12. Conditions Precedent to Sellers' Obligations.
All obligations of Sellers at the Closing are subject to,
at Sellers' option, each of the following conditions at
or prior to the Closing, and Purchaser shall use their
best efforts to cause each condition to be fulfilled:
12.1 All representations of Purchaser contained in
this Agreement or the related documents shall be correct
when made and as of the Closing.
12.2 All duties required by this Agreement to be
performed by Purchaser at or before the Closing shall be
performed.
13. Indemnification.
13.1 Sellers indemnify and agree to hold Purchaser
harmless from:
13.1.1 any loss suffered by Purchaser
because a representation was not true, a
warranty was breached or a duty was not
performed by Sellers contained in this
Agreement or a related document;
13.1.2 any loss suffered by Purchaser in
connection with any of Sellers' liabilities
which are not assumed by Purchaser under the
Liabilities Undertaking;
13.1.3 any liabilities or debts of
Sellers, 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;
13.1.4 any liabilities or debts of
Sellers, 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 Sellers'
business and in conformity with the
representations contained in this Agreement,
and (ii) assumed by Purchaser under the terms
of the Liabilities Undertaking; and
13.1.5 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.
13.2 Purchaser hereby agrees to indemnify and hold
Sellers harmless from:
13.2.1 any loss suffered by Sellers
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;
13.2.2 any liabilities or debts of
Sellers assumed by Purchaser under this
Agreement or the Liabilities Undertaking; and
13.2.3 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.
14. Nature and Survival of Representations and
Warranties. All representations and warranties contained
in this Agreement shall remain effective after the
Closing.
15. 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.
16. Arbitration.
16.1 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 finally 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 16.2.
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.
16.2 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) may award recovery of all
costs and fees (including attorneys' fees, administrative
fees, arbitrators' fees, and court costs) to the
prevailing party. 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.
16.3 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.
16.4 The Parties acknowledge that they have
read and understand the following disclosures:
ARBITRATION IS 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.
17. 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 to the extent awarded by arbitration.
18. Miscellaneous.
18.1 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.
18.2 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.
18.3 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.
18.4 The paragraph headings are for the purposes of
convenience only and are not intended to define or limit
the contents of the paragraphs.
18.5 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.
18.6 This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed
one original.
18.7 This Agreement and any amendments shall be
governed by and construed in accordance with law of the
State of Utah.
18.8 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
Sellers' business, (iii) as required by law, or (iv) as
is ascertainable from public information.
18.9 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.
SELLERS:
DISASTER PLUS CORP.
A Utah corporation
By: /s/ Robert D. Bleyl
Its:
/s/ Robert D. Bleyl
Robert D. Bleyl
/s/ David J. Bleyl
David J. Bleyl
PURCHASER:
VENTURI TECHNOLOGIES, INC.,
a Nevada corporation
By: /s/ John Hopkins
Its: President
<PAGE.
EXHIBIT "A-1"
Bill of Sale and Assignment
from Disaster Plus
<PAGE>
EXHIBIT "A-2"
Bill of Sale and Assignment
from Bleyls
<PAGE>
EXHIBIT "B"
Liabilities Undertaking
<PAGE>
Schedule 4.5
Allocation of Purchase Price
<PAGE>
Schdule 5.4
Liabilities
<PAGE>
Schedule 5.5
Taxes
<PAGE>
Schedule 5.6
Material Changes or Events
<PAGE>
Schedule 5.7
Litigation
<PAGE>
Schedule 5.8
Compliance With Laws and Other Instruments
<PAGE>
Schedule 5.10
Environmental Compliance
<PAGE>
Schedule 5.11
Schedules of Assets, Contracts, etc.
<PAGE>
Schedule 5.12
Guaranties
<PAGE>
Schedule 9.1
Sellers' Employees
NON-COMPETITION, CONFIDENTIALITY AND
CONTINUITY OF BUSINESS DEALINGS
UNDERTAKING
This NON-COMPETITION, CONFIDENTIALITY AND CONTINUITY OF
BUSINESS DEALINGS UNDERTAKING dated effective October 5, 1998
by David J. Bleyl, whose address is 960 East 155 South,
Lindon, Utah 84042 (hereinafter called the "Seller"), in favor
of VENTURI TECHNOLOGIES, 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 October 5,
1998 (the "Agreement"), with Seller and Disaster Plus Corp.
pursuant to which the Company purchased and Disaster Plus
Corp. sold, substantially all of Disaster Plus Corp.'s
business, assets, properties, goodwill and (the "Seller's
Assets"); and
WHEREAS, the Agreement requires that Seller execute and
deliver this Undertaking pursuant to which the rights of
Seller to compete against the Company or disclose the
Company's confidential information are restricted so as to
protect the Company's proprietary rights and interests.
NOW, THEREFORE, in consideration of the covenants set
forth herein and in the Agreement, 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 in which
Purchaser is doing business, 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 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 it is information that Seller had prior
to the time Seller entered into negotiations with the
Company leading up to the Closing of the transaction
contemplated in the Agreement, or if it is information
that 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.
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:
/s/ David J. Bleyl
David J. Bleyl
LIABILITIES UNDERTAKING
THIS LIABILITIES UNDERTAKING dated effective as of
October 5, 1998, by VENTURI TECHNOLOGIES, INC., a Nevada
corporation (hereinafter called the "Purchaser"), and Disaster
Plus Corp., a Utah corporation ("Disaster Plus"), and Robert
D. Bleyl and David J. Bleyl, owners of Disaster Plus Corp. and
owner of certain assets used by Disaster Plus in its carpet
cleaning business ("Bleyls"), with business addresses of 960
East 155 South, Lindon, Utah 84042 (Disaster Plus and Bleyls
are hereinafter called the "Sellers").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement of Purchase and Sale of
Assets dated effective October 5, 1998, among Purchaser and
Sellers (the "Agreement"), Sellers have concurrently herewith
sold, assigned, transferred, conveyed and delivered to
Purchaser substantially all of the business, assets,
properties, goodwill and rights of Sellers as a going concern
(the "Sellers' Assets"); and
WHEREAS, in partial consideration therefor, the Agreement
requires Purchaser to execute and deliver to Sellers 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 exceptions and limitations contained herein, to
perform, pay or discharge, and to indemnify Sellers with
respect to, all of the debts, contractual obligations, and
liabilities of Sellers relating directly to, and arising out
of, the carpet cleaning business conducted by Disaster Plus,
except those debts and liabilities that are set forth on
Schedule "A" 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 Sellers 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 Sellers except to the extent that (i) such
taxes constitute debts or liabilities of Sellers 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 Sellers on account of or with respect
to such tax liabilities; and (iii) the Sellers comply
with each of the following conditions:
(A) The Sellers 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 Sellers 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 Sellers 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 Sellers assumed
hereunder, including the defense, compromise or
settlement thereof, and in connection therewith the
Sellers 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 Sellers resulting
or arising from claims for personal injury or property
damage or out of any breach of any nonperformance by
Sellers 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 Sellers,
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" attached hereto in connection with the purchase of
goods or services in the ordinary course of Sellers'
business and in conformity with the representations,
warranties and covenants contained in the Agreement; or
(f) accounts payable incurred by Sellers that are
more than thirty (30) days past due as of the date of the
Closing.
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. It is expressly understood and agreed that all
debts, liabilities and obligations not assumed hereunder by
Purchaser shall remain the sole obligation of Sellers,
successors and assigns, and no person, firm or corporation
other than Sellers shall have any rights under this
Undertaking or the provisions herein.
VENTURI TECHNOLOGIES, INC.
a Nevada corporation
By: /s/ John Hopkins
Its: President
<PAGE>
SCHEDULE "A"
Debts and Liabilities Not Assumed by Purchaser
BILL OF SALE AND ASSIGNMENT
Disaster Plus Corp., a Utah corporation (hereinafter
collectively called "Assignor"), for One Dollar ($1.00) and other
valuable consideration, receipt of which is hereby acknowledged, by
these presents does sell, assign, transfer and convey unto Venturi
Technologies, 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 October 5 , 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 Books and records of Assignor;
(iv) 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 "Disaster Plus" or any similar name;
(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.
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 5th day of October, 1998.
ASSIGNOR:
Disaster Plus Corp., a Utah
corporation
By: s/
Its:
ASSIGNEE:
VENTURI TECHNOLOGIES, INC.
a Nevada corporation
By: s/
Its:
SCHEDULE "A"
(To Bill of Sale and Assignment)
Excluded Property and Assets
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is entered
into as of the 14th day of August, 1998, by and between Dirt
Free Carpet & Upholstery Cleaning, Inc., a Texas corporation
having its principal place of business at 3505 South Dairy
Ashford, Suite 251, Houston, Texas 77028 ("Dirt Free"), Aubry
Thoede, the owner of Dirt Free and the owner of certain assets
used by Dirt Free in the carpet cleaning business, having an
office at 3505 South Dairy Ashford, Suite 251, Houston, Texas
77028 ("Thoede") (Dirt Free and Thoede are sometimes
collectively referred to as "Sellers"), and Venturi
Technologies, Inc., a Nevada corporation, having its principal
office at 1327 North State Street, Orem, Utah 84057
("Purchaser").
WHEREAS, Sellers own and operate a carpet and upholstery
cleaning business located in the Houston, Texas area;
WHEREAS, Purchaser desires to purchase from Sellers, and
Sellers desire to sell to Purchaser substantially all of the
Sellers' Assets used in, and connected with, the Sellers'
carpet cleaning 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. Sellers shall sell to
Purchaser, and, subject to the License Agreement between the
parties, Purchaser shall purchase from Sellers substantially
all of Sellers' interest in all the business assets, goodwill
and rights owned by Sellers and used in the operation of
Sellers' business ("Sellers' Assets"), including (i) the right
to use Sellers' business name, (ii) the assets listed in the
Bills of Sale and Assignments attached as Exhibits "A-1" and
"A-2," and (iii) the assets listed on the Balance Sheet
described in Section 5.3, except for assets disposed of in the
ordinary course of Sellers' business between the Balance Sheet
Date and the Closing Date. Sellers shall transfer Sellers'
Assets free and clear of all liabilities and liens except as
provided by this Agreement.
2. Payment for Non-Competition and Confidentiality
Undertaking and For Sellers' Assets.
2.1 Cash Payment for Confidentiality and Non-Competition/Confidentiality
Undertaking. Upon the termination of the ninety (90) day recission period
specified in Section 2.5 herein, Thoede shall execute and deliver to Purchaser
a Non-competition, Confidentiality and Continuity of Business
Dealings Undertaking substantially in the form attached hereto
as Exhibit "B," and the Purchaser shall, upon delivery of the
executed Undertaking, and as consideration for such
Undertaking, pay to Thoede $150,000.00 in cash.
2.2 Stock for Sellers' Assets. As full payment for
Sellers' Assets, Purchaser shall, at the Closing, cause to be
issued to Sellers, in such proportions as directed by Sellers,
a total of 52,632 shares of Purchaser's $.001 par value common
stock (the "Shares").
2.3 Restricted Stock. The Shares issued to Sellers
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 Sellers
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 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.
Sellers represent the following to Purchaser in order to
establish exemptions from registration under Federal and state
securities laws. Seller are acquiring the Shares for their
own account, for investment, and not for resale in connection
with any distribution thereof. Sellers have such knowledge
and experience in business and financial matters that they are
capable of evaluating the risks of obtaining the Shares.
Sellers understand the speculative nature of the Shares.
Sellers have adequate net worth and means to provide for their
current needs and to sustain a complete loss of their
investment. Sellers have no need of liquidity of their
investment. Sellers understand 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.
2.4 Restriction on Resale. Except as provided below,
Sellers 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 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.
2.5 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 (60) days after the Closing Date, and it
cannot occur later than ninety (90) 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, Sellers shall return the
stock certificates and shall assume the liabilities assumed by
Purchaser on behalf of Seller, and Purchaser shall return
Sellers' Assets (or their net value).
2.6 Consent to Dilution. Sellers understand 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. Sellers understand and
consent that future issuance of stock will dilute Sellers'
proportionate ownership of Purchaser.
2.7 Liabilities Undertaking. At the Closing Purchaser
shall sign a Liabilities Undertaking in the form of the
attached Exhibit "___," pursuant to which Purchaser shall
assume to pay or discharge the obligations set forth therein.
2.8 Life Insurance. Within thirty (30) days after the
Closing Date Purchaser shall obtain a policy of life insurance
on Thoede's life, naming Thoede's wife as beneficiary, in the
face amount of $1,500,000. Purchaser shall pay all premiums
on such insurance, and shall maintain such insurance in effect
until such time as the common stock in Purchaser owned by
Thoede has an aggregate market value of at least $1,000,000,
at which time Purchaser shall no longer be required to make
premium payments on such insurance, and such insurance shall
either be allowed to be canceled or Thoede may take over the
payment of all premiums. Thoede shall submit to any physical
examinations and complete any applications that are required
in order to obtain such insurance.
3. Closing. The Closing shall take place at the close
of business on the ___ day of ________, 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 August 20, 1998.
4. Sellers' Obligations at Closing; Further Assurances.
4.1 At the Closing, Sellers shall deliver to Purchaser:
4.1.1 a cashier's or certified check payable
to Purchaser in the amount of Sellers' 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
Sellers agrees to keep enough money in the bank for
such checks to clear) or, at Purchaser's option, an
assignment of all of Sellers' bank accounts;
4.1.2 a Bill of Sale and Assignment signed by
Dirt Free in the form attached as Exhibit "A-1" and
a Bill of Sale and Assignment signed by Thoede in
the form attached as Exhibit "A-2;"
4.1.3 any other instruments of assignment and
transfer necessary to vest in Purchaser good and
marketable title to Sellers' Assets;
4.1.4 all contracts and records relating to
Sellers' Assets; and
4.1.5 all documents required by this
Agreement.
4.2 At any time after the Closing, Purchaser may request
and Sellers must sign and/or deliver any documents necessary
to transfer and assign to Purchaser, and confirm Purchaser's
title to Sellers' Assets, and to assist Purchaser in the
exercise of all rights thereto. After the Closing, Sellers
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 Sellers' name on checks received for such
receivables. Sellers shall transfer to Purchaser any cash or
other property Sellers receives for such receivables.
4.4 Sellers 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 Sellers' Assets as set forth in Schedule 4.5.
5. Representations and Warranties by Sellers. Sellers
represent and warrant to Purchaser as follows:
5.1 Organization, Standing and Qualification. Dirt Free
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Thoede is an
individual who owns all of the outstanding capital stock of
Dirt Free, and who owns some of the assets used by Dirt Free
in Dirt Free's carpet cleaning business. Sellers have all
requisite corporate or other power and authority and are
entitled to carry on their respective businesses as now being
conducted and to own, lease or operate their properties as and
in the places where such businesses are now conducted.
Sellers are properly licensed to conduct their respective
businesses.
5.2 Execution and Performance of Agreement; Authority.
The performance of this Agreement by Sellers will not result
in a default or breach of any other agreement to which Sellers
are a party. Sellers have the authority to enter into this
Agreement.
5.3 Financial Statements. The copies of the following
financial statements given to Purchaser and prepared by
Sellers (called the "Financial Statements") are complete and
correct, have been prepared from the records of Sellers in
accordance with generally accepted accounting principles and
fairly present the financial condition of Sellers as of their
dates and the results of its operations for the periods
covered thereby:
5.3.1 an unaudited balance sheet of Sellers
(the "Balance Sheet") as of ________, 199__, (the
"Balance Sheet Date") and Sellers' unaudited income
or cash flow statement for the period ended
__________, 199__.
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 Schedule 5.4 or on the Balance Sheet, as of the
Balance Sheet Date Sellers had no debts or obligations of any
nature whatsoever, including any tax liabilities incurred in
respect of Sellers' 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. Except as may be set forth on Schedule 5.5,
all taxes and assessments imposed by any taxing authority,
whether federal, state, local, foreign or otherwise which are
due or payable by Sellers, and all interest and penalties
thereon, have been paid in full. Except as may be set forth
on Schedule 5.5, all tax returns required to be filed have
been accurately prepared and filed and all deposits required
to be made by Sellers 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 Sellers, their employees, their properties, or
business or the transactions contemplated by this Agreement,
and Sellers knows of no basis for the same.
5.8 Compliance With Laws and Other Instruments. Except
as set forth in Schedule 5.8, Sellers has complied with all
laws applicable to their business. The ownership and use of
Sellers' Assets as well as the conduct of their business will
not conflict with the rights of any other person or entity,
and will not cause a default under any agreement to which
Sellers are a party. Sellers are not aware of any proposed
laws, condemnations or other proceedings which would affect
their business or Sellers' Assets.
5.9 Title to Properties. Sellers have good title to
Sellers' Assets. None of Sellers' 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.
Sellers' 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) Sellers' business is being
operated in compliance with all environmental laws and with
all terms of required permits and licenses, (b) Sellers are
not aware of any circumstances that may interfere with their
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 Sellers'
manufacture, storage, disposal, transport, or handling, or the
release into the environment, of any hazardous substance, (c)
there is no claim, investigation, or proceeding pending or
threatened against Seller, in connection with the Sellers'
Assets or their business relating to environmental laws, and
(d) Sellers currently maintains all material government
permits, licenses and agreements required to operate Sellers'
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 Sellers has
any ownership or other interest and which is used in
connection with the operation of their business.
5.11.2 As of a date no earlier than May 31,
1998, all of Sellers' 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 Sellers 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 Sellers or used in the
operation of Sellers' business.
5.11.5 All insurance policies insuring Sellers
or their 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 Sellers are a party.
5.11.7 All loan agreements, conditional sale
agreements, security agreements, guaranties, and
leases to which Sellers are 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 Sellers are a party.
5.11.9 The name of all banks where Sellers
have 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
Sellers and a summary of the terms thereof.
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 to 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 Sellers' Assets or
business or likely to result in any material loss or
liability. None of Sellers' existing or completed contracts
is subject to renegotiation with any government body.
5.12 No Guaranties. Except as may be set forth on
Schedule 5.12, no obligation of Sellers are guaranteed by any
other person or entity, nor has Sellers guaranteed any
obligation of any other person or entity.
5.13 Receivables. All Sellers' 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 Sellers 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
Sellers nor any employee or agent of Sellers 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 Sellers which (i)
might subject Sellers to liability in any proceeding, (ii) if
not given in the past, might have had an adverse effect on the
Sellers' Assets or business as reflected in the Financial
Statements, or (iii) if not continued in the future, might
adversely affect Sellers' Assets or business, or which might
subject Sellers to liability in any proceeding.
5.16 Disclosure. All of Sellers' representations made in
this Agreement and its related documents are true and contain
no untrue statements and do not omit important facts. Sellers
have disclosed, to the best of their knowledge, to Purchaser
in writing all the adverse facts concerning the Sellers'
Assets and their business.
5.17 No Conflict. Except as may be set forth on Schedule
5.17, or contained in any agreement attached hereto,
performance of this Agreement by Sellers will not conflict
with any regulations or agreements to which Sellers are a
party. No authorization or filing, which has not already been
completed, is necessary for Sellers to perform this Agreement.
6. Representations and Warranties by Purchaser.
Purchaser represents and warrants to Sellers 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 their business and to own and operate their 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, Sellers shall conduct their
business only in a manner consistent with their prior practice
and shall preserve their assets and properties in good
condition and maintain insurance thereon in accordance with
present practices, and Sellers will use their best efforts (i)
to preserve the business and organization of Sellers intact,
(ii) to keep available the services of Sellers' present
employees, agents and independent contractors, (iii) to
preserve the goodwill of Sellers' 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 Sellers
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,
Sellers shall give Purchaser prompt written notice.
7.3 Sellers shall consult with and follow the
recommendations of Purchaser with respect to (i) canceling
agreements to which Sellers are 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
Sellers 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 Sellers' business
consistent with prior practice, or to result in a breach by
Sellers of any of their representations contained in this
Agreement (unless the breach is waived by Purchaser).
8. Access to Information and Documents. Upon
Purchaser's request, Sellers shall give Purchaser access to
Sellers' personnel and all their properties, documents and
records relating to the carpet cleaning business conducted by
Dirt Free and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same
prior to the Closing.
9. Employment Matters.
9.1 Purchaser intends to provide employment to as many
of Sellers' current employees as possible. Schedule 9.1 is a
list of all Sellers' employees as of the date of this
Agreement, including the compensation for each employee.
Prior to the Closing Date, Purchaser shall provide Sellers 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 Sellers'
employees to enable them to use and sell Purchaser's products
and services.
10. Bulk Sales Compliance. Purchaser waives Sellers'
compliance with the Bulk Sales Law of any state. Sellers
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. Sellers
indemnify Purchaser against any liability or expense,
including attorneys' fees, incurred by Purchaser by reason of
the failure of Sellers to pay such claims.
11. 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 Sellers shall use their best efforts
to cause each condition to be fulfilled:
11.1 All representations of Sellers 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.
11.2 All duties required by this Agreement to be
performed by Sellers at or before the Closing shall be
performed.
11.3 Since the date of this Agreement there shall be no
material adverse change in the condition of Sellers' Assets or
their business.
11.4 All documents required to be delivered to Purchaser
at or prior to the Closing shall be delivered.
11.5 Sellers shall use its best efforts to obtain written
consents to the transfer or assignment to Purchaser of all
agreements of Sellers where the consent of any other party may
be required.
12. Conditions Precedent to Sellers' Obligations. All
obligations of Sellers at the Closing are subject to, at
Sellers' option, each of the following conditions at or prior
to the Closing, and Purchaser shall use their best efforts to
cause each condition to be fulfilled:
12.1 All representations of Purchaser contained in this
Agreement or the related documents shall be correct when made
and as of the Closing.
12.2 All duties required by this Agreement to be
performed by Purchaser at or before the Closing shall be
performed.
13. Indemnification.
13.1 Sellers indemnifies and agrees to hold Purchaser
harmless from:
13.1.1 any loss suffered by Purchaser because
a representation was not true, a warranty was
breached or a duty was not performed by Sellers
contained in this Agreement or a related document;
13.1.2 any loss suffered by Purchaser in
connection with any of Sellers' liabilities which
are not assumed by Purchaser under the Liabilities
Undertaking;
13.1.3 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;
13.1.4 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 Sellers'
business and in conformity with the representations
contained in this Agreement, and (ii) assumed by
Purchaser under the terms of the Liabilities
Undertaking; and
13.1.5 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.
13.2 Purchaser hereby agrees to indemnify and hold
Sellers harmless from:
13.2.1 any loss suffered by Sellers 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;
13.2.2 any liabilities or debts of Sellers
assumed by Purchaser under this Agreement or the
Liabilities Undertaking; and
13.2.3 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.
14. Nature and Survival of Representations and
Warranties. All representations and warranties contained in
this Agreement shall remain effective after the Closing.
15. 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.
16. Arbitration.
16.1 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 finally 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 16.2. 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.
16.2 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) may
award recovery of all costs and fees (including attorneys'
fees, administrative fees, arbitrators' fees, and court costs)
to the prevailing party. 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.
16.3 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.
16.4 The Parties acknowledge that they have read
and understand the following disclosures:
ARBITRATION IS 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.
17. 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 to the extent awarded by arbitration.
18. Miscellaneous.
18.1 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.
18.2 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.
18.3 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.
18.4 The paragraph headings are for the purposes of
convenience only and are not intended to define or limit the
contents of the paragraphs.
18.5 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.
18.6 This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one
original.
18.7 This Agreement and any amendments shall be governed
by and construed in accordance with law of the State of Utah.
18.8 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 Sellers' business, (iii) as required by law, or
(iv) as is ascertainable from public information.
18.9 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.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be signed as of the date first above written.
SELLERS:
DIRT FREE CARPET & UPHOLSTERY
CLEANING, INC.
By: /s/ Aubry Theode
Its: President
/s/ Aubry Theode
Aubry Thoede, doing business as
Dirt Free Carpet & Upholstery
Cleaning, Inc.
PURCHASER:
VENTURI TECHNOLOGIES, INC.,
a Nevada corporation
By: /s/ John Hopkins
Its: President
EXHIBIT "A-1"
Bill of Sale and Assignment
from Dirt Free
EXHIBIT "A-2"
Bill of Sale and Assignment
from Thoede
EXHIBIT "B"
Liabilities Undertaking
Schedule 4.5
Allocation of Purchase Price
Schdule 5.4
Liabilities
Schedule 5.5
Taxes
Schedule 5.6
Material Changes or Events
Schedule 5.7
Litigation
Schedule 5.8
Compliance With Laws and Other Instruments
Schedule 5.10
Environmental Compliance
Schedule 5.11
Schedules of Assets, Contracts, etc.
Schedule 5.12
Guaranties
Schedule 9.1
Sellers' Employees
EMPLOYMENT AGREEMENT
This agreement, which becomes effective as of October
5,1998, is made by and between Venturi Technologies, Inc., a
corporation duly organized and existing under the laws of the
State of Nevada, with its principal place of business at 1327
North State Street, Orem, Utah, hereinafter referred to as
employer, and David J. Bleyl, hereinafter referred to as
employee.
RECITALS
The parties recite and declare:
A. Employer is engaged in the business of carpet and
upholstery cleaning.
B. Employee has been engaged in and has had a great deal
of experience in the same type of business.
C. Employee is willing to be employed by employer, and
employer is willing to employ employee, on the terms, covenants,
and conditions set forth in this agreement.
In light of the above recitals, and in consideration of the
mutual promises and agreements set forth in this agreement,
employer and employee agree as follows:
SECTION ONE
EMPLOYMENT
A. Employer hereby employs, engages, and hires employee
as a Restoration Job Coordinator(job title) and employee hereby
accepts and agrees to such hiring, engagement, and employment,
subject to the general supervision and pursuant to the orders,
advice, and direction of employer.
B. Employee shall perform such duties as are customarily
performed by one holding a similar position in other businesses
or enterprises similar to the one engaged in by employer, and
shall render such other services and duties as may be assigned
to him from time to time by employer.
SECTION TWO
BEST EFFORTS OF EMPLOYEE
Employee agrees that he will faithfully, industriously, and
to the best of his ability, experience, and talents, perform all
duties that may be required of him pursuant to the terms of this
agreement, to the reasonable satisfaction of employer. Such
duties shall be rendered at 1327 N. State Street, Orem, Utah.
SECTION THREE
TERM OF EMPLOYMENT
The term of this agreement shall be three years, commencing
October 5, 1998 and terminating on October 5, 2001. At the
expiration date this agreement shall be renewed for one or more
regular periods of one year, unless either party objects to the
extension, in which case the parties shall then negotiate either
new agreement or the terms for terminating the employment.
SECTION FOUR
COMPENSATION OF EMPLOYEE
A. Employer shall pay employee, and employee shall accept
from employer, in full payment for employee's services under this
agreement, compensation at the rate of seven thousand six hundred
seventy nine dollars ($7,679) per month, or such higher salary
that the parties may mutually agree upon, to be paid in two equal
installments on the fifth and twentieth days of each month while
this agreement shall be in force. $3,679 of $7,679 to be paid
to Disaster Plus.
B. Employer shall also reimburse employee for all
necessary expenses including travel costs, airline fare, hotel
bills, meals, and other necessary and proper expenses incurred
by employee while traveling pursuant to employer's directions.
SECTION FIVE
TERMINATION DUE TO DISCONTINUANCE OF BUSINESS
In spite of anything contained in this agreement to the
contrary, in the event that employer shall discontinue operating
its business then this agreement shall terminate as of the last
day of the month in which employer ceases operations-with the
same force and effect as if the last day of the month were
originally set as the termination date of this agreement.
SECTION SIX
OTHER EMPLOYMENT
Nothing contained in this agreement shall limit or prevent
t right of the employee to invest any of his money in the capital
stock or other securities of any corporation whose stock or
securities are publicly owned or are regularly traded on any
public exchange, nor shall anything contained in this agreement
be deemed to prevent employee from investing or limit employee's
right to invest his money in real estate.
SECTION SEVEN
RECOMMENDATIONS FOR IMPROVING OPERATIONS
Employee shall make available to employer all information
of ch employee shall have any knowledge and shall make all
suggestions and recommendations that will be of mutual benefit
to employer and employee.
SECTION EIGHT
TRADE SECRETS
Employee shall not at any time or in any manner, either
directly or indirectly, divulge, disclose or communicate to any
person, firm, corporation, or other entity in any manner
whatsoever any information concerning any matters affecting or
relating to the business of employer. That information includes,
without limitation, any of employer's customers, the prices it
obtains or has obtained from the sale of, or at which it sells
or has sold, its products, or any other information concerning
the business of employer, its manner of operation, its plans,
processes, or other data without regard to whether all of the
above-stated matters will be deemed confidential, material, or
important. Employer and employee specifically and expressly
stipulate that as between them, such matters are important,
material and confidential and gravely affect the effective and
successful conduct of the business of employer, and employer's
good will. Any breach of the terms of this section shall be a
material breach of this agreement.
SECTION NINE
TRADE SECRETS AFTER TERMINATION OF EMPLOYMENT
All of the terms of Section Eight of this agreement shall
remain in full force and effect for one year after the
termination of employee's employment.
SECTION TEN
ADDITIONAL COMPENSATION
Employee shall be entitled to additional compensation by
reason of any additional service that he may perform as a member
of the managing committee of employer, or in the event that he
shall at any time be elected an officer of director of employer.
SECTION ELEVEN
EMPLOYEE'S INABILITY TO CONTRACT FOR EMPLOYER
In spite of anything contained in this agreement to the
contrary, employee shall not have the right to make any contracts
or commitments for or on behalf of employer without first
obtaining the consent of employer.
SECTION TWELVE
AGREEMENTS OUTSIDE OF CONTRACT
Other than the attached sales agreement, which is an
integral part of this employment contract, this agreement
contains the complete agreement concerning the employment
arrangement between the parties and shall, as of the effective
date hereof, supersede all other agreements between the parties.
The parties stipulate that neither of them has made any
representation with respect to the subject matter of this
agreement or any representations, including the execution and
delivery of this agreement, except such representations as are
specifically set forth in this agreement. Each of the parties
acknowledges that he or it has relied on his or its own judgment
in entering into this agreement. The parties further acknowledge
that any payments or representations that may have been made by
either of them to the other prior to the date of executing this
agreement are of no effect and that neither of them has relied
thereon in connection with his or its dealings with the other.
SECTION THIRTEEN
VACATION, HOLIDAYS AND SICK LEAVE
A. Employee shall be entitled to 15 days of paid vacation
each year during the term of this agreement. The time for such
vacation shall be determined by mutual agreement between employer
and employee.
B. Employee shall be entitled each year, at a minimum, to
the following paid holidays: New Year's Day, Memorial Day, the
Fourth of July, Labor Day, Thanksgiving Day, Christmas Day, and
one floating holiday.
C. Employee shall accrue one day of sick leave per month.
SECTION FOURTEEN
MEDICAL AND OTHER BENEFITS
A. Employer agrees to include employee in the coverage by
the hospital, surgical, and medical benefit plan with __n/a_____
(provider's name) that was adopted by employer on ____n/a_______.
B. Employee shall be entitled to and shall receive all
other benefits and conditions of employment available generally
to other employees of employer employed at the same level and
responsibility of employee pursuant to employer plans and
programs, including by way of illustration, but not by way of
limitation, group health insurance benefits, life insurance
benefits, profit sharing benefits, and pension and retirement
benefits.
SECTION FIFTEEN
MODIFICATION OF AGREEMENT
Any modification of this agreement or additional obligation
assumed by either party in connection with this agreement shall
be binding only if evidenced in writing signed by each party or
an authorized representative of each party.
SECTION SIXTEEN
WORK FACILITIES
Employee shall be provided with an office, books, technical
and clerical assistance and such other facilities, supplies,
equipment, and services suitable to employee's position and
adequate for the performance of employees duties and pursuant to
this agreement.
SECTION SEVENTEEN
TERMINATION
A. At will employment. Employee is an "at will" employee,
meaning that employee's continued employment hereunder is at the
will of employer. Except as may be otherwise set forth in this
agreement, the board of directors of employer may terminate this
agreement and employee's hereunder at any time and for any
reason, with or without cause.
B. Termination for cause. If employer terminates this
agreement for cause, all of employer's obligations to employee
hereunder, including the obligation to pay employee's salary,
shall immediately terminate. "Cause" for purposes of the
preceding sentence shall be defined as: (i) employee's inability
to provide the services to employer contemplated hereunder
because of actual or threatened liability of employee under any
prior non-competition agreements to which employee may be a
party; (ii) employee's willful or gross misconduct of a severity,
magnitude, or public nature which is reasonably expected to cause
material harm to the business or reputation or employer; (iii)
an act by employee constituting fraud, theft, or conviction of
a felony; or (iv) such abuse of or impairment caused by any drug,
alcohol, or any controlled substance which significantly affects
the performance of employee. Such determination shall be made
by the employer and delivered to the employee in writing, and
shall be final and conclusive.
C. Termination without cause, If employer terminates this
agreement without cause, employee shall be entitled to receive,
as such payments would have become due if this agreement had not
been terminated, employee's unpaid base salary as provided in
this agreement, for the shorter of eighteen (18) months from the
date of termination or the expiration of the term to this
agreement.
SECTION EIGHTEEN
EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this agreement will not and
shall not be deemed to affect the validity of any other
provision. In the event that any provision of this agreement is
held to be invalid, the parties agree that the remaining
provisions shall be deemed to be in full force and effect as if
they had been executed by both parties subsequent to the
expungement of the invalid provision.
SECTION NINETEEN
CHOICE OF LAW
It is the intention of the parties to this agreement that
this agreement and the performance under this agreement, and all
suits and special proceedings under this agreement, be construed
in accordance with and pursuant to the laws of the State of Utah
and that, in any action, special proceeding or other proceeding
that may be brought arising out of, in connection with, or by
reason of this agreement, the laws of the State of Utah shall be
applicable and shall govern to the exclusion of the law of any
other forum, without regard to the jurisdiction in which any
action or special proceeding may be instituted.
SECTION TWENTY
NO WAIVER
The failure of either party to this agreement to insist upon
the performance of any of the terms and conditions of this
agreement, or the waiver of any breach of any of the terms and
conditions of this agreement, shall not be construed as
thereafter waiving any such terms and conditions, but the same
shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
SECTION TWENTY-ONE
ATTORNEY FEES
In the event that any action is filed in relation to this
agreement, the unsuccessful party in the action shall pay to the
successful party, in addition to all the sums that either party
may be called on to pay as damages, a reasonable sum for the
successful party's attorney's fees.
SECTION TWENTY-TWO
TERMINATION BY DEATH
If employee dies before his employment with corporation is
otherwise terminated, the payments to which employee would then
have been entitled if at the date of employee's death his
employment had been terminated while employee still lived, as
determined under the terms of this agreement, shall be made to
employee's beneficiary, and if no beneficiary survives employee,
the entire amount due employee shall be paid to his estate.
SECTION TWENTY-THREE
NON-TRANSFERABILITY
This is a personal agreement. Employee's rights under this
agreement may not be sold, transferred, assigned, pledged, or
hypothecated.
SECTION TWENTY-FOUR
PARAGRAPH HEADINGS
The titles to the paragraphs of this agreement are solely
for the convenience of the parties and shall not be used to
explain, modify, simplify, or aid in the interpretation of the
provisions of this agreement.
SECTION TWENTY-FIVE
NO PRESUMPTION BASED ON DRAFTING
Both parties hereto have participated equally in preparing
this agreement with the help of legal counsel. Therefore, this
agreement is not be construed more strictly against one party
than the other by virtue of drafting.
In witness whereof, each party to this agreement has caused
it to be executed at 1327 N. State Street, Orem, Utah on the date
indicated below.
Dated: October 5, 1998.
/s/ David J. Bleyl
David J. Bleyl
/s/ John Hopkins
For Venturi Technologies, Inc.
Name: John Hopkins
Title: President
EMPLOYMENT AGREEMENT
This agreement, which becomes effective as of October
5,1998, is made by and between Venturi Technologies, Inc., a
corporation duly organized and existing under the laws of the
State of Nevada, with its principal place of business at 1327
North State Street, Orem, Utah, hereinafter referred to as
employer, and Robert Bleyl, hereinafter referred to as employee.
RECITALS
The parties recite and declare:
A. Employer is engaged in the business of carpet and
upholstery cleaning.
B. Employee has been engaged in and has had a great deal
of experience in the same type of business.
C. Employee is willing to be employed by employer, and
employer is willing to employ employee, on the terms, covenants,
and conditions set forth in this agreement.
In light of the above recitals, and in consideration of the
mutual promises and agreements set forth in this agreement,
employer and employee agree as follows:
SECTION ONE
EMPLOYMENT
A. Employer hereby employs, engages, and hires employee
as a Restoration Job Coordinator(job title) and employee hereby
accepts and agrees to such hiring, engagement, and employment,
subject to the general supervision and pursuant to the orders,
advice, and direction of employer.
B. Employee shall perform such duties as are customarily
performed by one holding a similar position in other businesses
or enterprises similar to the one engaged in by employer, and
shall render such other services and duties as may be assigned
to him from time to time by employer.
SECTION TWO
BEST EFFORTS OF EMPLOYEE
Employee agrees that he will faithfully, industriously, and
to the best of his ability, experience, and talents, perform all
duties that may be required of him pursuant to the terms of this
agreement, to the reasonable satisfaction of employer. Such
duties shall be rendered at 1327 N. State Street, Orem, Utah.
SECTION THREE
TERM OF EMPLOYMENT
The term of this agreement shall be three years, commencing
October 5, 1998 and terminating on October 5, 2001. At the
expiration date this agreement shall be renewed for one or more
regular periods of one year, unless either party objects to the
extension, in which case the parties shall then negotiate either
new agreement or the terms for terminating the employment.
SECTION FOUR
COMPENSATION OF EMPLOYEE
A. Employer shall pay employee, and employee shall accept
from employer, in full payment for employee's services under this
agreement, compensation at the rate of seven thousand six hundred
seventy nine dollars ($7,679) per month, or such higher salary
that the parties may mutually agree upon, to be paid in two equal
installments on the fifth and twentieth days of each month while
this agreement shall be in force. $3,679 of $7,679 to be paid
to Disaster Plus.
B. Employer shall also reimburse employee for all
necessary expenses including travel costs, airline fare, hotel
bills, meals, and other necessary and proper expenses incurred
by employee while traveling pursuant to employer's directions.
SECTION FIVE
TERMINATION DUE TO DISCONTINUANCE OF BUSINESS
In spite of anything contained in this agreement to the
contrary, in the event that employer shall discontinue operating
its business then this agreement shall terminate as of the last
day of the month in which employer ceases operations-with the
same force and effect as if the last day of the month were
originally set as the termination date of this agreement.
SECTION SIX
OTHER EMPLOYMENT
Nothing contained in this agreement shall limit or prevent
t right of the employee to invest any of his money in the capital
stock or other securities of any corporation whose stock or
securities are publicly owned or are regularly traded on any
public exchange, nor shall anything contained in this agreement
be deemed to prevent employee from investing or limit employee's
right to invest his money in real estate.
SECTION SEVEN
RECOMMENDATIONS FOR IMPROVING OPERATIONS
Employee shall make available to employer all information
of ch employee shall have any knowledge and shall make all
suggestions and recommendations that will be of mutual benefit
to employer and employee.
SECTION EIGHT
TRADE SECRETS
Employee shall not at any time or in any manner, either
directly or indirectly, divulge, disclose or communicate to any
person, firm, corporation, or other entity in any manner
whatsoever any information concerning any matters affecting or
relating to the business of employer. That information includes,
without limitation, any of employer's customers, the prices it
obtains or has obtained from the sale of, or at which it sells
or has sold, its products, or any other information concerning
the business of employer, its manner of operation, its plans,
processes, or other data without regard to whether all of the
above-stated matters will be deemed confidential, material, or
important. Employer and employee specifically and expressly
stipulate that as between them, such matters are important,
material and confidential and gravely affect the effective and
successful conduct of the business of employer, and employer's
good will. Any breach of the terms of this section shall be a
material breach of this agreement.
SECTION NINE
TRADE SECRETS AFTER TERMINATION OF EMPLOYMENT
All of the terms of Section Eight of this agreement shall
remain in full force and effect for one year after the
termination of employee's employment.
SECTION TEN
ADDITIONAL COMPENSATION
Employee shall be entitled to additional compensation by
reason of any additional service that he may perform as a member
of the managing committee of employer, or in the event that he
shall at any time be elected an officer of director of employer.
SECTION ELEVEN
EMPLOYEE'S INABILITY TO CONTRACT FOR EMPLOYER
In spite of anything contained in this agreement to the
contrary, employee shall not have the right to make any contracts
or commitments for or on behalf of employer without first
obtaining the consent of employer.
SECTION TWELVE
AGREEMENTS OUTSIDE OF CONTRACT
Other than the attached sales agreement, which is an
integral part of this employment contract, this agreement
contains the complete agreement concerning the employment
arrangement between the parties and shall, as of the effective
date hereof, supersede all other agreements between the parties.
The parties stipulate that neither of them has made any
representation with respect to the subject matter of this
agreement or any representations, including the execution and
delivery of this agreement, except such representations as are
specifically set forth in this agreement. Each of the parties
acknowledges that he or it has relied on his or its own judgment
in entering into this agreement. The parties further acknowledge
that any payments or representations that may have been made by
either of them to the other prior to the date of executing this
agreement are of no effect and that neither of them has relied
thereon in connection with his or its dealings with the other.
SECTION THIRTEEN
VACATION, HOLIDAYS AND SICK LEAVE
A. Employee shall be entitled to 15 days of paid vacation
each year during the term of this agreement. The time for such
vacation shall be determined by mutual agreement between employer
and employee.
B. Employee shall be entitled each year, at a minimum, to
the following paid holidays: New Year's Day, Memorial Day, the
Fourth of July, Labor Day, Thanksgiving Day, Christmas Day, and
one floating holiday.
C. Employee shall accrue one day of sick leave per month.
SECTION FOURTEEN
MEDICAL AND OTHER BENEFITS
A. Employer agrees to include employee in the coverage by
the hospital, surgical, and medical benefit plan with ___n/a____
(provider's name) that was adopted by employer on ___n/a________.
B. Employee shall be entitled to and shall receive all
other benefits and conditions of employment available generally
to other employees of employer employed at the same level and
responsibility of employee pursuant to employer plans and
programs, including by way of illustration, but not by way of
limitation, group health insurance benefits, life insurance
benefits, profit sharing benefits, and pension and retirement
benefits.
SECTION FIFTEEN
MODIFICATION OF AGREEMENT
Any modification of this agreement or additional obligation
assumed by either party in connection with this agreement shall
be binding only if evidenced in writing signed by each party or
an authorized representative of each party.
SECTION SIXTEEN
WORK FACILITIES
Employee shall be provided with an office, books, technical
and clerical assistance and such other facilities, supplies,
equipment, and services suitable to employee's position and
adequate for the performance of employees duties and pursuant to
this agreement.
SECTION SEVENTEEN
TERMINATION
A. At will employment. Employee is an "at will" employee,
meaning that employee's continued employment hereunder is at the
will of employer. Except as may be otherwise set forth in this
agreement, the board of directors of employer may terminate this
agreement and employee's hereunder at any time and for any
reason, with or without cause.
B. Termination for cause. If employer terminates this
agreement for cause, all of employer's obligations to employee
hereunder, including the obligation to pay employee's salary,
shall immediately terminate. "Cause" for purposes of the
preceding sentence shall be defined as: (i) employee's inability
to provide the services to employer contemplated hereunder
because of actual or threatened liability of employee under any
prior non-competition agreements to which employee may be a
party; (ii) employee's willful or gross misconduct of a severity,
magnitude, or public nature which is reasonably expected to cause
material harm to the business or reputation or employer; (iii)
an act by employee constituting fraud, theft, or conviction of
a felony; or (iv) such abuse of or impairment caused by any drug,
alcohol, or any controlled substance which significantly affects
the performance of employee. Such determination shall be made
by the employer and delivered to the employee in writing, and
shall be final and conclusive.
C. Termination without cause, If employer terminates this
agreement without cause, employee shall be entitled to receive,
as such payments would have become due if this agreement had not
been terminated, employee's unpaid base salary as provided in
this agreement, for the shorter of eighteen (18) months from the
date of termination or the expiration of the term to this
agreement.
SECTION EIGHTEEN
EFFECT OF PARTIAL INVALIDITY
The invalidity of any portion of this agreement will not and
shall not be deemed to affect the validity of any other
provision. In the event that any provision of this agreement is
held to be invalid, the parties agree that the remaining
provisions shall be deemed to be in full force and effect as if
they had been executed by both parties subsequent to the
expungement of the invalid provision.
SECTION NINETEEN
CHOICE OF LAW
It is the intention of the parties to this agreement that
this agreement and the performance under this agreement, and all
suits and special proceedings under this agreement, be construed
in accordance with and pursuant to the laws of the State of Utah
and that, in any action, special proceeding or other proceeding
that may be brought arising out of, in connection with, or by
reason of this agreement, the laws of the State of Utah shall be
applicable and shall govern to the exclusion of the law of any
other forum, without regard to the jurisdiction in which any
action or special proceeding may be instituted.
SECTION TWENTY
NO WAIVER
The failure of either party to this agreement to insist upon
the performance of any of the terms and conditions of this
agreement, or the waiver of any breach of any of the terms and
conditions of this agreement, shall not be construed as
thereafter waiving any such terms and conditions, but the same
shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
SECTION TWENTY-ONE
ATTORNEY FEES
In the event that any action is filed in relation to this
agreement, the unsuccessful party in the action shall pay to the
successful party, in addition to all the sums that either party
may be called on to pay as damages, a reasonable sum for the
successful party's attorney's fees.
SECTION TWENTY-TWO
TERMINATION BY DEATH
If employee dies before his employment with corporation is
otherwise terminated, the payments to which employee would then
have been entitled if at the date of employee's death his
employment had been terminated while employee still lived, as
determined under the terms of this agreement, shall be made to
employee's beneficiary, and if no beneficiary survives employee,
the entire amount due employee shall be paid to his estate.
SECTION TWENTY-THREE
NON-TRANSFERABILITY
This is a personal agreement. Employee's rights under this
agreement may not be sold, transferred, assigned, pledged, or
hypothecated.
SECTION TWENTY-FOUR
PARAGRAPH HEADINGS
The titles to the paragraphs of this agreement are solely
for the convenience of the parties and shall not be used to
explain, modify, simplify, or aid in the interpretation of the
provisions of this agreement.
SECTION TWENTY-FIVE
NO PRESUMPTION BASED ON DRAFTING
Both parties hereto have participated equally in preparing
this agreement with the help of legal counsel. Therefore, this
agreement is not be construed more strictly against one party
than the other by virtue of drafting.
In witness whereof, each party to this agreement has caused
it to be executed at 1327 N. State Street, Orem, Utah on the date
indicated below.
Dated: October 5, 1998.
/s/ Robert D. Bleyl
Robert D. Bleyl
/s/ John Hopkins
For Venturi Technologies, Inc.
Name: John Hopkins
Title: President
CONSENT
We consent to the inclusion in the registration statement of
Venturi Technologies, Inc. on Form SB-2 of our Carpet Cleaning
System Analysis Interim Report dated September 19, 1997.
COMBUSTION RESOURCES
By: /s/ Craig Eatough
Title: Senior Manager
BILL OF SALE AND ASSIGNMENT
Aubry Thoede, an individual who owns all of the
outstanding stock of Dirt Free Carpet & Upholstery Cleaning,
Inc., a Texas corporation, and who owns certain tangible and
intangible assets used in the carpet cleaning business
conducted by Dirt Free Carpet & Upholstery Cleaning, Inc.,
(Aubry Thoede is hereinafter referred to as the "Assignor"),
for One Dollar ($1.00) and other valuable consideration,
receipt of which is hereby acknowledged, by these presents does
sell, assign, transfer and convey unto Venturi Technologies,
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, which are used in the carpet cleaning
business conducted by Dirt Free Carpet & Upholstery
Cleaning, Inc., excepting only those properties of
Assignor listed on Schedule "A" annexed hereto or
covered by the License Agreement between the parties
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 ___________
, 1998 between Assignor as Seller and Assignee as
Purchaser (the "Agreement"), which includes, without
limitation, the following:
(i) All fixed assets including, without
limitation, leaseholds and leasehold improvements,
fixtures, machinery, tools, equipment, cars and
trucks;
(ii) All books and records of Assignor
relating to the carpet cleaning business conducted
by Dirt Free Carpet & Upholstery Cleaning, Inc.;
(iii) All contracts, agreements and understandings
to which Assignor is a party or by which Assignor may
have any rights or obligations relating to the carpet
cleaning business conducted by Dirt Free Carpet &
Upholstery Cleaning, Inc., subject to the terms thereof;
and
(iv) 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, as they relate to the carpet cleaning business
conducted by Dirt Free Carpet & Upholstery Cleaning, Inc.
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, subject to any other agreements
between the parties hereto.
AND, Assignor does hereby warrant, covenant and agree
that he:
(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 ___ day of _________, 1998.
ASSIGNOR:
Aubry Thoede
ASSIGNEE:
VENTURI TECHNOLOGIES, INC.
a Nevada corporation
By:
Its:
SCHEDULE "A"
(To Bill of Sale and Assignment)
Excluded Property and Assets
