<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number 000-25183
VENTURI TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
NEVADA 87-0580279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
763 NORTH 530 EAST 84097
OREM, UTAH (ZIP CODE)
(Address of principal executive offices)
Registrant's telephone number, including area code: (801) 235-9552
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 11, 1999, Registrant had outstanding 10,365,976 shares of
Common Stock.
<PAGE>
PART I -- FINANCIAL INFORMATION
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30,
1999
------------
<S> <C>
Current Assets:
Cash and cash equivalents $ 2,135,774
Accounts receivable, net 1,074,594
Prepaid expenses and other 97,381
Deposits 392,512
------------
Total Current Assets 3,700,261
Property, Plant and Equipment, net 4,375,526
Income taxes benefit 3,932,866
Other Assets 703,137
------------
Total Assets $ 12,711,790
------------
------------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
2
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1999
--------------
<S> <C>
Current Liabilities:
Short-term debt $ 213,588
Payroll taxes payable 336,468
Accounts payable 1,501,873
Preferred dividends payable 57,218
Accrued liabilities 319,619
Customer Deposits 30,060
--------------
Total Current Liabilities 2,245,237
--------------
Long-term Notes payable 4,229,346
--------------
Total Liabilities 6,688,171
--------------
Shareholders' Equity:
Common stock, $0.001 par value, 20,000,000 shares authorized; 10,366
10,365,976 shares issued
Preferred Stock 3,181
Additional Paid In Capital 15,327,815
Preferred dividend 0
Retained earnings (loss) (7,923,576)
Year-to-date earnings (loss) (1,394,167)
--------------
Total shareholders' Equity 6,023,619
--------------
Total Liabilities and Equity $ 12,711,790
--------------
--------------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
3
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30
------------------------------------
1999 1998
------------- ------------
<S> <C> <C>
REVENUE $ 2,220,199 $ 935,465
COSTS AND EXPENSES:
Cost of Goods sold 276,384 106.156
Direct wages and costs 665,936 226,818
----------- ------------
942,320 332,974
----------- ------------
GROSS PROFIT 1,277,878 602,491
------------- ------------
OPERATING EXPENSES 1,431,254 813,332
------------- ------------
NET OPERATING INCOME (153,375) (210,841)
------------- ------------
GENERAL AND ADMINISTRATIVE 910,077 862,536
------------- ------------
INCOME BEFORE INCOME TAXES (1,063,452) (1,073,377)
------------- ------------
PROVISION FOR INCOME TAXES (372,208) (375,682)
------------- ------------
NET INCOME $ (691,244) $ (697,695)
------------- ------------
NET INCOME PER COMMON SHARE $ (0.07) $ (0.16)
------------- ------------
COMMON SHARES OUTSTANDING 10,365,976 4,495,375
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statement.
4
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
June 30
1999 1998
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 1,698,883 $ 877,384
Cash paid to suppliers and employees (3,372,729) (1,706,912)
Interest paid (151,363) (70,947)
Interest received 28,168 1,798
Income taxes paid 0 0
------------ -------------
Net Cash Provided by Operating Activities (1,797,041) (898,677)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,893,667) (963,519)
Net proceeds from lease line 729,730 587,564
Net Cash Used in Investing Activities (1,163,937) (375,955)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividends (15,727) (0)
Proceeds from selling of stock 4,820,000 1,271,631
Proceeds from Capital leases and notes 0 70,849
Proceeds from exercise of stock options 0 0
------------ -------------
Net Cash from Financing Activities 4,804,273 1,342,480
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,843,295 67,848
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 292,479 20,179
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,135,774 $ 88,027
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
5
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Reconciliation of Net Income to Net Cash Provided by Operating Activities
<TABLE>
<CAPTION>
Three Months Ended
June 30
--------------------------------
1999 1998
------------ -----------
<S> <C> <C>
NET INCOME $ (691,244) $ (697,695)
------------ -----------
Depreciation and amortization 237,770 133,722
(Increase) decrease in accounts receivable (654,343) (58,082)
Increase in prepaid expenses and other assets (3,884) 0
Increase in accrued liabilities 136,911 0
Increase (decrease) in accounts payable (450,043) 99,060
Increase (decrease) in deferred income tax benefit (372,208) (375,682)
------------ -----------
Total Adjustments (1,105,797) (200,982)
------------ -----------
Net Cash Provided by Operating Activities $ (1,797,041) $ (898,677)
------------ -----------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements
6
<PAGE>
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 -- Interim Financial Statement Policies and Disclosures
The unaudited, consolidated, condensed financial statements of
Venturi Technologies Inc., a Nevada corporation, included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote Disclosures normally required in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
These consolidated, condensed financial statements reflect all
adjustments which, in the opinion of management, are necessary to present a
fair statement of the results of operations for the interim periods
presented. All of the adjustments which have been made in these consolidated,
condensed financial statements are of a normal recurring nature.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's latest Annual Report on Form 10-KSB.
Note 2 -- Equipment Purchases
During the first quarter of 1999, the Company ordered an additional
140 trucks equipped with carpet cleaning equipment. Of the 140 ordered 27
have been placed in service during the second quarter of 1999. The remaining
113 trucks will be delivered in increments through March 2000. After all the
trucks are in service, Venturi's truck mounted carpet cleaning fleet will
total 192 trucks. The 140 trucks ordered during the first quarter of 1999 are
being financed using capital leases with five-year terms. The effective
implicit interest rate in the leases is 18 %.
Note 3 -- Investments
On April 14, 1999, the Company sold and issued 2,303,738 shares of
Series D Convertible Preferred Stock ("Series D Preferred Stock") to Beaulieu
Group, LLC, a Georgia limited liability company ("Beaulieu"), in exchange for
the cash payment of $3,000,000, in a transaction that was exempt from
registration with the Securities and Exchange Commission pursuant to Rules
505 and 506 promulgated under the Securities Act of 1933. The Series D
Preferred Stock does not carry a dividend preference, but it does provide for
a liquidation preference in the amount of the original issue price plus a
cumulative return of 8% per annum. The liquidation preference is on an equal
footing with the Series A, Series B, and Series C Preferred Stock. The
holders of Series D Preferred Stock were also given the right to appoint one
member to Venturi's Board of Directors.
7
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The Series D Preferred Stock is convertible into common stock at any
time on the basis of two (2) shares of common stock for each one (1) share of
Series D Preferred Stock. On a fully diluted basis, Beaulieu is now the
beneficial owner of approximately 25.75% of the Company's common stock.
Concurrently with the closing of the sale of Series D Preferred
Stock, the Company and Beaulieu entered into a Marketing agreement that
provides, among other things, that Beaulieu will promote and endorse the
Company's VenturiClean System and that the Company will not endorse or
recommend goods manufactured by any carpet or fiber manufacturer other than
Beaulieu.
Beaulieu and its affiliates are privately owned companies that are
among the largest manufacturers of carpet and rugs in the world.
On June 3, 1999, Greenwich A.G., a Germany based investment fund,
purchased 1,600,000 shares of common stock in a private placement, at a total
price of $2,000,000, all of which was available as operating capital.
Greenwich was also issued a warrant to purchase 22,806 shares of Venturi's
common stock for a price of $30.00 per share. Venturi can force the exercise
of the warrant if Venturi reaches certain designated financial milestones.
Greenwich was also granted registration rights with respect to the sale of
common stock, and was given the right to appoint one member to Venturi's
Board of Directors.
Note 4 -- Acquisitions / Penetration
There were no acquisitions in the second quarter 1999. The company
concentrated on penetration in current markets. As new trucks have been
placed in service Venturi has experienced a steady increase in revenue. The
new trucks combined with a grassroots marketing program have resulted in
revenues of over $900,000 in June 1999 and over $1,100,000 in July.
8
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
This Form 10-QSB may contain trend information and forward-looking
statements that involve risks and uncertainties. The actual results of
operations of the Company could differ materially from the Company's
historical results of operations and those discussed in such forward- looking
statements as a result of certain factors set forth in this section and
elsewhere in this Form 10-QSB, including information incorporated by
reference.
RESULTS OF OPERATIONS
The Company's revenue for the second quarter of 1999 increased 137%
over revenue for the same three month period in 1998. This increase was
primarily attributable to several acquisitions by the Company of independent
carpet cleaning and restoration businesses during 1998 and to an increase in
market share in those geographic markets in which the Company operates. The
increase in revenue was also attributable to more trucks being placed into
service, and to more aggressive marketing made possible largely by the
availability of operating capital.
The Company's cost of goods sold and direct wages and costs
increased approximately 183% from the second quarter of 1998 to the second
quarter of 1999. The cost of goods and direct wages also increased as a
percentage of total sales from the second quarter of 1998 to the second
quarter of 1999. This increase was primarily attributable to the acquisition
of several independent carpet cleaning and restoration businesses. The
increase was also attributable to an increase in direct wages primarily to
employees of independent businesses acquired by the Company during the
assimilation period following acquisition.
Operating costs increased approximately 76% in the second quarter of
1999 as compared to the second quarter of 1998, again primarily as a result
of the Company's acquisitions and its marketing efforts to increase market
penetration. However, the Company's operating costs decreased from 86.9% of
revenue in the second quarter of 1998 to 64.5% of revenue in the second
quarter of 1999. This decrease in the percentage of revenue utilized for
operating costs was attributable to increased efficiencies in operations and
the reorganization of some of the acquired companies.
General and administrative expenses increased just 5% from the
second quarter of 1998 to the second quarter of 1999. The increase was
primarily because of increased personnel to handle the assimilation of recent
acquisitions and to the Company's continued efforts to build a solid
infrastructure to handle the Company's anticipated rapid growth.
LIQUIDITY
During the second quarter of 1999, the Company raised $5,000,000
from the sale of common and preferred stock (see Note 3 to Consolidated
Condensed Financial Statements). The proceeds from those sales of stock
should enable the Company to continue operations at their present level for
several months. For the month of July 1999, the Company had a positive net
cash flow for the
9
<PAGE>
first time in its history. Management is optimistic that the Company will
continue at or near a positive cash flow into the future. The Company
continues to raise investment capital, to be used to fund expansion and
growth and to be used as consideration to acquire independent carpet cleaning
businesses. Management is confident of its ability to continue to raise
investment capital as needed.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Management
of the Company does not anticipate that any significant modification or
replacement of the Company's software will be necessary for its computer
systems to properly utilize dates beyond December 31, 1999 or that the
Company will incur significant operating expenses to make any such computer
system improvements. The Company is not able to determine, however, whether
any of its suppliers, lenders, or service providers will need to make any
such software modifications or replacements or whether the failure to make
such software corrections will have an effect on the Company's operations or
financial condition.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) (a) EXHIBITS
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-B or are incorporated by reference to previous filings.
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
10.55 Securities Purchase Agreement, dated June 3, 1999 between Venturi
Technologies, Inc. and Greenwich A.G.
10.56 Registration Rights Agreement dated June 3, 1999 between Venturi
Technologies, Inc. and Greenwich A.G.
10.57 License Right of First Refusal Agreement dated June 3, 1999 between
Venturi Technologies, Inc. and Greenwich A.G.
10.58 Lock-up Agreement, dated June 3, 1999, executed by Gaylord Karren
in favor of Greenwich A.G.
10.59 Lock-up Agreement, dated June 3, 1999, executed by John Hopkins in
favor of Greenwich A.G.
10.60 Lock-up Agreement, dated June 3, 1999, executed by Greenwich A.G.
in favor of Venturi Technologies, Inc.
10.61 Warrant to Purchase Shares of Common Stock, dated June 3, 1999,
between Venturi Technologies, Inc. and Greenwich A.G.
</TABLE>
b) No reports were filed on Form 8-K during the quarter for which this
report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
VENTURI TECHNOLOGIES, INC.
Dated: August 16, 1999 By: /s/ Gaylord M. Karren
----------------------------------------
Gaylord M. Karren, Chairman of the Board
and Chief Executive Officer
By: /s/ B.J. Mendenhall
----------------------------------------
B.J. Mendenhall
Chief Accounting Officer
<PAGE>
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
VENTURI TECHNOLOGIES, INC.
AND
GREENWICH, AG.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1. PURCHASE AND SALE OF SECURITIES.......................................................................1
1.1 The Shares.............................................................................1
1.2 Purchase and Sale of the Securities....................................................1
1.3 Representations by Greenwich...........................................................1
1.4 Restrictive Legend.....................................................................2
ARTICLE 2. CONDITIONS PRECEDENT TO CLOSING.......................................................................2
2.1 Conditions Precedent to Greenwich's Obligations........................................2
(a) Representations and Warranties of the Company.........................2
(b) Company Documentation at Closing......................................2
(c) Consents, Waivers etc.................................................4
2.2 Conditions Precedent to the Company's Obligations......................................4
(a) Representations and Warranties of Greenwich...........................4
(b) Purchaser Documentation at Closing....................................4
ARTICLE 3. REPRESENTATION AND WARRANTIES OF THE COMPANY .........................................................5
3.1 Organization and Standing of the Company...............................................5
3.2 Corporate Action.......................................................................5
3.3 Government Approvals...................................................................5
3.4 Litigation.............................................................................6
3.5 Compliance with Other Instruments......................................................6
3.6 Title to Assets, and Properties........................................................6
3.7 Insurance..............................................................................7
3.8 Taxes..................................................................................7
3.9 Transactions with Affiliates...........................................................7
3.10 Assumptions or Guaranties of Indebtedness of Other Persons.............................7
3.11 Investments............................................................................8
3.12 Compliance with Governmental Regulations...............................................8
3.13 Registration Rights....................................................................8
3.14 Securities Act and Exchange Act Compliance.............................................8
3.15 Disclosure.............................................................................8
3.16 No Brokers or Finders..................................................................8
3.17 Certain Representations Regarding Employees............................................9
3.18 Capitalization; Status of Capital Stock................................................9
3.19 Books and Records.....................................................................10
3.20 Payments..............................................................................10
3.21 Financial Statements..................................................................10
i
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3.22 Environmental Matters.................................................................11
ARTICLE 4. AFFIRMATIVE COVENANTS OF THE COMPANY ...............................................................12
4.1 Covenants of the Company During the Time that
Greenwich Owns the Shares ............................................................12
(a) Payment of Taxes and Trade Debt......................................12
(b) Maintenance of Insurance.............................................12
(c) Preservation of Corporate Existence..................................12
(d) Compliance with Laws.................................................13
(e) Keeping of Records and Books of Account..............................13
(f) Maintenance of Properties............................................13
(g) Inspection...........................................................13
4.2 Listing of the Company's Common Stock on a National Exchange..........................13
4.3 Audited Financial Statements of the Company...........................................13
4.4 Costs and Expenses of Registration of the Shares......................................13
4.5 Daily Transfer Sheets.................................................................14
ARTICLE 5. NEGATIVE COVENANTS OF THE COMPANY....................................................................14
5.1 Negative Covenants of the Company.....................................................14
(a) Liquidation, Recapitalization, Etc...................................14
(b) Budgets and Board Approval...........................................14
(c) Indemnification Provisions; Director Insurance.......................14
(d) Dealings with Affiliates and Others..................................14
(e) Consideration for Issuance of Shares.................................15
(f) Negative Pledge......................................................15
(g) Limitation on Indebtedness...........................................15
(h) Limitation on Issuance of Equity Securities..........................15
(i) Limitation on Distributions..........................................15
(j) Limitation on Redemption of Debt.....................................15
(k) Limitations on Amendments............................................16
(l) Limitations on Company Actions.......................................16
(m) Phantom Stock........................................................16
(n) Asset Sales..........................................................16
(o) Subsidiaries.........................................................16
5.2 Employee Stock Options................................................................17
5.3 Sales of Securities under Regulation S................................................17
5.4 Repayment of Company Indebtedness.....................................................17
5.5 Press Releases........................................................................17
5.6 Sales Below Greenwich Purchase Price..................................................17
ARTICLE 6. OTHER REQUIREMENTS OF THE COMPANY....................................................................17
6.1 Reporting Requirements................................................................17
6.2 Board Representation..................................................................18
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6.3 Actions Requiring Board Consideration.................................................18
6.4 Management Consultation with Board of Directors.......................................19
6.5 Lock-Up Agreements for Karren and Hopkins.............................................20
6.6 Key Man Life Insurance................................................................20
ARTICLE 7. MERGERS AND ACQUISITIONS............................................................................20
7.1 Introduced Transaction................................................................20
7.2 Payment of Finder's Fee...............................................................21
ARTICLE 8. DEFINITIONS AND ACCOUNTING TERMS.....................................................................21
8.1 Certain Defined Terms.................................................................21
8.2 Accounting Terms......................................................................22
ARTICLE 9. INDEMNIFICATION BY THE COMPANY.......................................................................23
9.1 Indemnification.......................................................................23
ARTICLE 10. MISCELLANEOUS ......................................................................................23
10.1 No Waiver; Cumulative Remedies........................................................23
10.2 Notice................................................................................23
10.3 Costs, Expenses and Taxes.............................................................24
10.4 Binding Effect; Assignment............................................................24
10.5 Survival of Representations and Warranties............................................25
10.6 Prior Agreements......................................................................25
10.7 Severability..........................................................................25
10.8 Governing Law.........................................................................25
10.9 Headings..............................................................................25
10.10 Counterparts..........................................................................25
10.11 Further Assurances....................................................................25
10.12 Attorneys' Fees.......................................................................25
10.13 Remedies..............................................................................25
10.14 Time of Essence.......................................................................25
10.15 Joint Drafting of Agreement...........................................................26
10.16 Facsimile Signature...................................................................26
</TABLE>
iii
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is made and entered into this
3rd day of June, 1999 (this "Agreement"), by and among VENTURI TECHNOLOGIES,
INC., a corporation formed under the laws of the State of Nevada (the
"Company"); and GREENWICH, AG., a German company ("Greenwich").
ARTICLE 1.
PURCHASE AND SALE OF SECURITIES
1.1 THE SHARES. The Company has authorized the issuance and
sale of One Million Six Hundred Thousand (1,600,000) shares of the Company's
common stock, par value USD $0.001 per share (the "Shares") to Greenwich at a
price of USD $1.25 per share.
1.2 PURCHASE AND SALE OF THE SECURITIES. The Company agrees to
issue and sell to Greenwich, and, subject to and in reliance upon the
representations, warranties, terms and conditions of this Agreement,
Greenwich agrees to purchase the Shares for an aggregate purchase price of
$2,000,000.00 (the "Purchase Price"). As additional consideration for the
Purchase Price, the Company shall issue a warrant to Greenwich (the
"Warrant") to purchase up to Twenty Two Thousand Eight Hundred Seven (22,807)
shares of the Company's common stock at a price of Thirty Dollars ($30.00)
per share. The Warrant shall be substantially in the form attached hereto as
EXHIBIT "A". The Shares and the Warrant are sometimes collectively referred
to herein as the "Securities". The purchase and sale of the Securities shall
take place at a closing (the "Closing") to be held at the offices of Gardere
& Wynne, L.L.P. on June 3, 1999 at 10:00 am, or on such other date and at
such other time as may be mutually agreed upon by the parties to this
Agreement. At the Closing, the Company shall issue and deliver to Greenwich a
certificate evidencing the Shares and issue and deliver to Greenwich the
Warrant against delivery by wire transfer to the Company of the Purchase
Price.
1.3 REPRESENTATIONS BY GREENWICH. Greenwich represents that:
(a) Greenwich has duly authorized, executed and delivered
this Agreement and this Agreement constitutes the valid and enforceable
obligation of Greenwich, except as such enforceability may be limited
by general equity principles or by applicable bankruptcy, insolvency or
other laws affecting creditors' rights generally.
(b) Greenwich (i) has sufficient net worth to sustain a
loss of all of its interest in the Company and can bear the economic
risk of its investment in the Company, (ii) understands that an
investment is speculative and involves a high degree of risk, and (iii)
has been afforded an adequate opportunity to ask questions of and
receive satisfactory answers
1
<PAGE>
from the Company concerning the terms and conditions of the investment
contemplated under this Agreement.
(c) Greenwich is acquiring the Shares for investment for
its own account and not with a view to, or for resale in connection
with, any distribution thereof. By execution of this Agreement,
Greenwich represents that it has no agreement, contract or
understanding with any person or entity to sell, transfer or grant
rights in any of the Shares.
(d) Greenwich understands that the Shares have not been
and, except as may be provided by this Agreement or ancillary
agreements hereto, will not be registered under applicable state or
federal securities laws by reason of certain exemptions from the
registration provisions thereof which depend upon, among other things,
the bonafide nature of Greenwich's representations and investment
intent as expressed herein. Greenwich acknowledges that the Shares must
be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is
available.
1.4 RESTRICTIVE LEGEND. Each certificate representing the Shares
shall bear a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED SECURITIES WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. THE ISSUER OF THESE SECURITIES WILL NOT TRANSFER SUCH
SECURITIES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE ISSUER THAT THE
REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY
APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
ARTICLE 2.
CONDITIONS PRECEDENT TO CLOSING
2.1 CONDITIONS PRECEDENT TO GREENWICH'S OBLIGATIONS. The
obligation of Greenwich to purchase and pay for the Securities at the Closing is
subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Each
of the representations and warranties of the Company set forth in
Article 3 hereof shall be true on the date of the Closing.
(b) COMPANY DOCUMENTATION AT CLOSING. Greenwich shall
have received, prior to or at the Closing, all of the following, each
in form and substance satisfactory to Greenwich
2
<PAGE>
and its counsel, and all of the following events shall have occurred
prior to or simultaneously with the Closing hereunder
(i) A copy of all charter documents of the
Company, certified by the Secretary of State of Nevada, a
certified copy of the resolutions of the Board of Directors of
the Company and, if required, the stockholders of the Company,
evidencing approval of this Agreement, the authorization for
issuance of the Shares, and other matters contemplated hereby;
a certified copy of the Bylaws of the Company, as amended; and
certified copies of all documents evidencing other necessary
corporate or other action and governmental approvals, if any,
with respect to this Agreement and the Shares.
(ii) A favorable opinion of Mackey Price &
Williams, P.C., counsel for the Company, in the form set forth
in EXHIBIT "B".
(iii) A certificate of the Secretary or an
Assistant Secretary of the Company stating the names of the
officers of the Company authorized to sign this Agreement, the
certificates evidencing the Shares and other documents or
certificates to be delivered pursuant to this Agreement by the
Company or any of its officers, together with the true
signatures of such officers.
(iv) A certificate from a duly authorized officer
of the Company stating that the representations and warranties
of the Company contained in Article 3 hereof and otherwise
made by the Company in writing in connection with the
transactions contemplated hereby are true and correct in all
material respects and that all conditions required to be
performed by the Company prior to or at the Closing have been
performed.
(v) Certificates representing the Shares and the
Warrant being issued and sold by the Company to Greenwich
pursuant to Section 1.2 hereof duly recorded on the books of
the Company in the name of Purchaser and authenticated by the
transfer agent for the Company, together with such other
supporting documents as may be, in the opinion of counsel for
Greenwich, reasonably necessary to permit Greenwich to acquire
free and clear title to the Shares.
(vi) Receipt for the payment delivered to the
Company by Greenwich pursuant to Section 2.2(b)(i) hereof.
(vii) A certificate of the Secretary of State of
the State of Nevada as to the good standing of the Company
dated no earlier than 90 days prior to the Closing.
(viii) Certificates of existence in good standing
and qualification to transact business as a foreign
corporation (or similar documents) of the Company from the
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Secretaries of State of the states of Utah, Texas and
California and any states where the failure so to qualify
could have a material adverse effect upon the Company.
(ix) A Registration Rights Agreement, in the form
set forth in EXHIBIT "C" executed and delivered by the
Company.
(x) A Licensing Right of First Refusal
Agreement, in the form set forth in EXHIBIT "D", executed and
delivered by the Company and the parties named therein.
(xi) A Lock-up Agreement, in the form set forth
in EXHIBIT "E", executed and delivered by each of Gaylord
Karren and John Hopkins.
(c) CONSENTS, WAIVERS ETC. Prior to the Closing, the
Company shall have obtained all consents or waivers, if any, necessary
or appropriate to execute and deliver this Agreement, issue the Shares
and the Warrant and carry out the transactions contemplated hereby and
thereby, and all such consents and waivers shall be in full force and
effect. All corporate and other action and governmental filings
necessary to effectuate the terms of this Agreement and other
agreements and instruments executed and delivered by the Company in
connection herewith, shall have been made or taken. In addition to the
documents set forth above, the Company shall have provided Greenwich
any other information or copies of documents that it may reasonably
request.
2.2 CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.
(a) REPRESENTATIONS AND WARRANTIES OF GREENWICH. The
representations and warranties of Greenwich set forth in Section 1.3
hereof shall be true on the date of the Closing.
(b) PURCHASER DOCUMENTATION AT CLOSING. The Company shall
have received, prior to or at the Closing, all of the following, each
in form and substance satisfactory to the Company and its counsel, and
all of the following events shall have occurred prior to or
simultaneously with the Closing hereunder.
(i) Payment to the Company of the Purchase Price
for the Securities in the manner specified in Section 1.2
hereof
(ii) A certificate from a duly authorized officer
of Greenwich stating that the representations and warranties
of Greenwich contained in Section 1.3 hereof and otherwise
made by Greenwich in writing in connection with the
transactions contemplated hereby are true and correct in all
material respects and that all conditions required to be
performed by Greenwich prior to or at the Closing have been
performed.
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(iii) A Registration Rights Agreement, in the form
set forth in EXHIBIT "C", executed and delivered by Greenwich.
(iv) A Licensing Right of First Refusal
Agreement, in the form set forth in EXHIBIT "D", executed and
delivered by Greenwich.
(v) An Investor Lock-Up Agreement in the form
set forth in EXHIBIT "F", executed and delivered by Greenwich.
ARTICLE 3.
REPRESENTATION AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows:
3.1 ORGANIZATION AND STANDING OF THE COMPANY. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite corporate power and authority for the ownership and
operation of its properties and for the carrying on of its business as now
conducted and as now proposed to be conducted. The Company is duly licensed or
qualified to do business and is in good standing as a foreign corporation in the
States of Utah, Texas and California, which are the only jurisdictions in which
the character of the property owned or leased, or the nature of the activities
conducted, by the Company makes such licensing or qualification necessary.
Except as set forth on SCHEDULE 3.1 hereto, the Company does not own any equity
interest, directly or indirectly, in any person or business enterprise and has
never operated as a subsidiary or a division of any other person.
3.2 CORPORATE ACTION. The Company has all necessary corporate
power and has taken all corporate action required to make all the provisions of
this Agreement and any other agreements and instruments executed in connection
herewith and therewith the legal, valid, binding and enforceable obligations of
the Company, except as such enforceability may be limited by general equity
principles or by applicable bankruptcy, insolvency or other laws affecting
creditors' rights generally. At the time of Closing, the issuance of the
Securities will not be subject to preemptive or other preferential rights, or
similar statutory or contractual rights, either arising pursuant to any
agreement or instrument to which the Company is a party or which is otherwise
binding upon the Company.
3.3 GOVERNMENT APPROVALS. No authorization, consent, approval,
license, exemption of or filing or registration with any Person any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
offer, issuance, sale, execution or delivery by the Company, or for the
performance by the Company of its obligations under, this Agreement.
3.4 LITIGATION. Except as set forth on SCHEDULE 3.4, there is no
litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened against or in
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any way affecting the Company, its operations, any of its properties or
assets, or any of its officers, employees or principal stockholders that
might, individually or in the aggregate have a material adverse effect upon
the business, operations, affairs or condition of the Company, or any of its
properties or assets, or call into question the validity of this Agreement,
any of the Shares, the Warrant, or any action taken or to be taken pursuant
hereto or thereto. To the knowledge of the Company, there has not occurred
any event nor does there exist any condition which might give rise to any
such litigation, proceeding or investigation. Neither the Company, nor, to
the Company's knowledge, any officer, employee or principal stockholder of
the Company, is in default with respect to any order, writ, injunction,
decree, ruling or agency that might result, either individually or in the
aggregate, in any material adverse change in the business, operations,
affairs or condition of the Company or its properties or assets.
3.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is in
compliance with the terms and provisions of this Agreement and of its
Articles of incorporation and Bylaws and with the terms and provisions of
each mortgage, indenture, lease, or other agreement or instrument to which
the Company is a party, by which the Company is bound, or to which its
properties or assets are subject, and of all judgments, decrees, governmental
orders, and, to the Company's knowledge, statutes, rules or regulations by
which the Company is bound or to which its properties or assets are subject.
Except as set forth in SCHEDULE 3.5 hereto, the Company is not a party to any
material contract or commitment (or group of related contracts or
commitments). Neither the execution and delivery of this Agreement nor the
issuance of the Securities, nor the consummation of any transaction
contemplated hereby or thereby, has constituted or resulted in or will
constitute or result in a default or violation of any term or provision in
any of the foregoing documents or instruments.
3.6 TITLE TO ASSETS, AND PROPERTIES.
(a) Except as set forth in SCHEDULE 3.6(a), the Company
has good, clear and marketable title to its properties and assets, and
all such properties and assets are free and clear of mortgages,
pledges, security interests, liens, charges, claims, restrictions and
other encumbrances (including without limitation, easements and
licenses), except for liens or for current taxes not yet due and
payable and minor imperfections of title, if any, not material in
nature or amount, not materially detracting from the value or impairing
the use of property subject thereto or impairing the operations or
proposed operations of the Company.
(b) Each lease or agreement to which the Company is a
party under which it is a lessee of any property, real or personal, is
a valid and subsisting agreement, duly authorized and entered into,
without any default of the Company thereunder and, to the best of the
Company's knowledge, without any default thereunder or any other party
thereto. No event has occurred and is continuing which, with due notice
or lapse of time or both, would constitute a default or event of
default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto.
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(c) Except as set forth in SCHEDULE 3.6(c) hereto, the
Company owns or will have valid right to use all patents, patent
rights, licenses, permits, trade secrets, trademarks, trademark rights,
trade names or trade name rights, franchises, copyrights, inventions
and intellectual property rights used or proposed to be used in its
business; and, to the knowledge of the Company, the conduct of the
Company's business does not and will not conflict, in any respect, with
valid patents, patent rights, licenses, permits, trade secrets
trademarks, trademark rights, trade names or trade name rights,
franchisees, copyrights, inventions or intellectual property rights of
others.
3.7 INSURANCE. SCHEDULE 3.7 discloses all insurance policies
with respect to which the Company is the owner, insured or beneficiary or
under which any assets of the business are insured. Such policies are
reasonable, both in scope and amount, in light of the risks attendant to the
business and are comparable in coverage to policies customarily maintained by
others of similar size, located in similar communities engaged in similar
lines of business. There is no claim pending under any of such policies as to
which coverage has been questioned, denied or disputed. All premiums required
to be paid in connection with the insurance, policies of the Company have
been paid in full.
3.8 TAXES. The Company has filed or caused to be filed on a
timely basis, or will file or cause to be filed on a timely basis, all tax
returns that are required to be filed by the Company with respect to its
business prior to or on the Closing Date, pursuant to the law of each
governmental authority with taxing power over it. All such tax returns were
or will be, as the case may be, correct and complete. The Company has paid or
will pay all taxes that have or will become due, except such taxes, if any,
as are (i) being contested in good faith, and fully reserved against on the
Company's audited balance sheet for fiscal year 1998 (the "1998 Balance
Sheet") or any interim period. No claim has been made by a taxing authority
of a jurisdiction where the Company does not file tax returns that it is or
may be subject to taxation in that jurisdiction. The Company has withheld and
paid all taxes required to have been withheld in correction with amounts paid
or owing to any employee, independent contractor, creditor, stockholder or
other third party.
3.9 TRANSACTIONS WITH AFFILIATES. Except as set forth in
SCHEDULE 3.9 hereto, there are no loans, leases, royalty agreements or other
continuing transactions between the Company and (i) any of the Company's
customers or suppliers other than those entered into in the ordinary course
of business, (ii) any officer or director of the Company, (iii) any Person
owning one percent (1%) or more of any class of capital stock of the Company
or any member of such stockholders family or (iv) any corporation or other
entity controlled by such officer, director, stockholder or a member of such
stockholder's family or in which such stockholder or a member of such
stockholder's family owns or has a material interest.
3.10 ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS.
The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable with respect to (including, without
limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise
invest in the debtor or otherwise to assure the creditor against loss) any
Indebtedness of any other Person.
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3.11 INVESTMENTS. Except as set forth on SCHEDULE 3.11 the
Company has not made any loan or advance to any Person that is outstanding on
the date of this Agreement nor is the Company obligated or continued to make
any such loan or advance, nor does the Company own any capital stock, assets
comprising the business of, obligations of, or any interest in, any Person.
3.12 COMPLIANCE WITH GOVERNMENTAL REGULATIONS. The Company is in
compliance with all laws and governmental rules and regulations applicable to
its business, properties and assets, and to the services, products and equipment
designed, manufactured or sold by it, including, without limitation, all such
laws, rules and regulations relating to fair employment practices, public or
employee safety and environmental protection, and similar matters. The Company
now holds all governmental permits or licenses required to own its assets and
operate its business. No notice or warning from any authority with respect to
the suspension, revocation or termination of any such permit or license has been
received by the Company.
3.13 REGISTRATION RIGHTS. Except as set forth in SCHEDULE 3.13
hereto, no Person has demand or other rights to cause the Company to file any
registration statement under the Securities Act relating to any securities of
the Company or any right to participate in any such registration statement.
3.14 SECURITIES ACT AND EXCHANGE ACT COMPLIANCE. The Company has
registered its Common Stock pursuant to Section 12 of the Exchange Act, is in
full compliance with all reporting requirements of the Exchange Act and the
Common Stock is quoted on the NASDAQ Over-The-Counter Bulletin Board (trading
symbol: VTIX). Upon issuance and delivery at the Closing, in accordance with
this Agreement, the Shares will be duly and validly authorized and issued, fully
paid and non assessable, free from all encumbrances and restrictions other than
restrictions on transfer imposed by applicable securities laws and/or this
Agreement, and will not subject the holders thereof to personal liability by
reason of being such holders. No authorization, approval, filing or consent of
any governmental body is required for the issuance and sale of the Shares,
except for filings pursuant to Regulation D under the Securities Act or any
state blue sky filings.
3.15 DISCLOSURE. Neither this Agreement, nor any other agreement,
document, certificate or written or oral statement furnished to Greenwich or its
counsel, in connection with the transactions contemplated by this Agreement by
or on behalf of the Company (when considered in the aggregate), contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
3.16 NO BROKERS OR FINDERS. Except as set forth in SCHEDULE 3.16,
no Person has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or valid claim against or upon the Company for
any commission, fee or other compensation as a finder or broker because of any
act or omission by the Company or any agent of the Company. The Company agrees
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to indemnify and hold Greenwich harmless against any such commissions, fees or
other compensation payable by the Company in connection with the transactions
contemplated under this Agreement.
3.17 CERTAIN REPRESENTATIONS REGARDING EMPLOYEES.
(a) Except as set forth in SCHEDULE 3.17 hereto, no
employee of the Company is a party to or bound by any agreement,
contract or commitment, or subject to any restrictions, particularly
but without limitation in connection with any previous employment of
any such person, which materially adversely affects, or in the future
may reasonably be expected to materially adversely affect, the business
or operations of the Company or the right of any such person to
participate in the affairs of the Company;
(b) To the best of the Company's knowledge, no officer of
the Company has any present intention of terminating his employment
with the Company, and the Company does not have any present intention
of terminating any such employment;
(c) The Company is not a party to any collective
bargaining agreement and, to the best of the Company's knowledge, no
organizational efforts are currently being made by any union with
respect to any of the Company's employees; and
(d) Except as set forth in SCHEDULE 3.17 hereto, the
Company has no contracts, directly or indirectly, with any employee,
director, officer or shareholder of the Company.
3.18 CAPITALIZATION; STATUS OF CAPITAL STOCK.
(a) As of the date hereof the Company has a total
authorized capitalization consisting of 20,000,000 shares of Common
Stock, USD $0.001 par value per share, of which 8,679,976 shares are
issued and outstanding, and 5,000,000 shares of Preferred Stock,
USD$0.001 par value per share, of which 64,410 shares of 10% Cumulative
Convertible Series A Preferred Stock, 260,000 shares of 6% Cumulative
Convertible Series B Preferred Stock, 552,845 shares of 6% Cumulative
Convertible Series C Preferred Stock and 2,303,738 shares of Series D
Convertible Preferred Stock are issued and outstanding. Except as set
forth in SCHEDULE 3.18(a) hereto, there are no options, warrants or
rights to acquire shares of the capital stock or other securities of
the Company authorized, issued or outstanding, nor is the Company
obligated in any other manner to issue shares of its capital stock or
other securities. Except as set forth in SCHEDULE 3.18(a) hereto, there
are no restrictions on the transfer of shares of capital stock of the
Company other than those imposed by relevant state and federal
securities laws. Except as set forth in SCHEDULE 3.18(a), no holder of
any security of the Company is entitled to preemptive or similar
statutory or contractual rights, either arising pursuant to any
agreement or instrument to which the Company is a party or that is
otherwise binding upon the company. Except as provided in SCHEDULE
3.18(a) hereto, the Company is not a party to, and to its knowledge, no
stockholder of the Company is a party to, any voting agreements, voting
trusts, proxies or any other agreements, instruments or
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understandings with respect to the voting of any shares of the capital
stock of the Company, or any agreement with respect to the
transferability, purchase or redemption of any shares of capital stock
of the Company.
(b) The Company has not created any right to acquire an
equity interest, or any interest measured by income, profits or any
results of operations or by the value of any stock, or any similar or
related right of interest.
(c) The pro-forma capitalization of the Company after
giving effect to the transactions contemplated by this Agreement is
attached hereto as SCHEDULE 3.18(c) and is true and correct.
3.19 BOOKS AND RECORDS. The books of account, ledgers, order
books, records and documents of the Company accurately and completely reflect
all information relating to the business of the Company, the nature,
acquisition, maintenance, location and collection of the assets of the
Company, and the nature of all transactions giving rise to the obligations or
accounts receivable of the Company.
3.20 PAYMENTS. Neither the Company nor any officer, director or
employee of the Company has, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item of property, however
characterized. to any person, government official or other party, in any
manner related to the business or operations of the Company, which may have
been illegal under any federal, State or local law and which may have a
material adverse effect on the business, properties or assets of the Company,
including but not limited to, the Foreign Corrupt Practices Act.
3.21 FINANCIAL STATEMENTS. The Company has delivered to
Greenwich (i) the consolidated audited balance sheet of the Company for its
fiscal years ended December 31, 1998, December 31, 1997 and December 31,
1996, and the consolidated audited statements of operation, stockholders'
equity and changes in financial position for the fiscal years then ended,
each accompanied by a report of the Company's independent certified public
accountants and (ii) the consolidated unaudited balance sheet of the Company
as of April 30, 1999, and the consolidated unaudited statements of
operations, stockholders' equity and changes in financial position for the
four month period then ended (all of the financial statements referred to the
preceding clauses (i), (ii), and (iii) are herein collectively referred to as
the "Financial Statements"). All of the Financial Statements, including the
notes thereto, (i) have been prepared in accordance with the books and
records of the Company, (ii) present fairly in all material respects the
financial position of the Company as of their respective dates and the
results of operations and changes in financial position for the respective
periods indicated, and (iii) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as
otherwise noted in the notes thereto), subject in the case of unaudited
statements normal year end adjustments. SCHEDULE 3.21 sets forth all changes
in accounting methods (for financial accounting purposes) made, agreed to or
requested or required with respect to the Company during the past five years.
Except as set forth in the Financial Statements, the Company has no
liabilities,
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contingent or absolute, matured or unmatured, except for liabilities incurred
in the ordinary course of business which, in the aggregate, do not have a
material adverse effect upon the Company.
3.22 ENVIRONMENTAL MATTERS.
(a) The Company is in material compliance with all
Environmental Laws (as defined below). The Company does not have any
material liability under any Environmental Law, nor is the Company
responsible for any liability of any other person under any
Environmental Law. There are no pending or, to the knowledge of the
Company, threatened actions, suits, claims, legal proceedings or other
proceedings based on, and the Company has not directly or indirectly
received any notice of any complaint, order, directive, citation,
notice of responsibility, notice of potential responsibility, or
information request from any government entity or any other person
arising out of or attributable to: (i) the current or past presence at
any location of Hazardous Materials (as defined below) or any
substances that pose a hazard to human health or an impediment to
working conditions; (ii) the current or past release or threatened
release into the environment of any Hazardous Materials or any
substances that pose a hazard to human health or an impediment to
working conditions; (iii) the off-site disposal of Hazardous Materials;
or (iv) any violation of Environmental Laws or otherwise arising from
the Company's activities whether or not involving Hazardous Materials.
(b) As used herein, these terms shall have the following
meanings:
(i) "ENVIRONMENTAL LAWS" means all applicable
federal, state and local laws, rules, requirements and
regulations relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or protection of human
health as it relates to the environment including, without
limitation, laws and regulations relating to releases of
Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials or relating to
management of asbestos in buildings.
(ii) "HAZARDOUS MATERIALS" means wastes,
substances, or materials (whether solids, liquids or gases)
that are deemed hazardous, toxic, pollutants, or contaminants.
including without limitation, substances defined as "hazardous
substances", "toxic substances", "radioactive materials", or
other similar designations in, or otherwise subject to
regulation under, any Environmental Laws.
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ARTICLE 4.
AFFIRMATIVE COVENANTS OF THE COMPANY
4.1 COVENANTS OF THE COMPANY DURING THE TIME THAT GREENWICH OWNS
THE SHARES. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that following the Closing until Greenwich no
longer owns the Shares, it will perform and observe the following covenants and
provisions and will cause each Subsidiary to perform and observe such of the
following covenants and provisions as are applicable to such Subsidiary:
(a) PAYMENT OF TAXES AND TRADE DEBT. The Company shall
pay and discharge, and cause each Subsidiary to pay and discharge, all
taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or business, or upon any properties
belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims, which, if unpaid, might become a material lien
or charge upon any properties of the Company or any Subsidiary,
provided that neither the Company nor any Subsidiary shall be required
to pay any such tax, assessment, charge, levy or claim did is being
contested in good faith if the Company or Subsidiary concerned shall
have set aside on its books adequate reserves with respect thereto as
shall he determined by its Board of Directors. The Company shall pay
and cause each Subsidiary to pay, when due, or in conformity with
customary trade terms, all lease obligations, all trade debt and all
other Indebtedness incident to the operations of the Company or its
Subsidiaries, except such as are being contested in good faith if the
Company or Subsidiary concerned shall have set aside on its books
adequate reserves with respect thereto as shall be determined by its
Board of Directors.
(b) MAINTENANCE OF INSURANCE. The Company shall maintain,
and cause each Subsidiary to maintain, with responsible and reputable
insurance companies or associations insurance in such amounts and
covering such risks as the Board of Directors deems adequate and
advisable given the nature of the businesses conducted by the Company
and each such Subsidiary (including directors and officers liability
insurance).
(c) PRESERVATION OF CORPORATE EXISTENCE. The Company
shall use its best efforts to preserve and maintain, and cause each
Subsidiary to use its best efforts to preserve and maintain, its
corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified,
and cause each Subsidiary to qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or
ownership of its properties. The Company shall use its best efforts to
preserve and maintain, and cause each Subsidiary to preserve and
maintain, to the extent of their respective rights therein, licenses
and other rights to use Patents, permits, trade secrets, processes,
licenses, trademarks, trade names, inventions, intellectual property
rights, copyrights or franchises owned or possessed by it and necessary
to the conduct of its business.
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(d) COMPLIANCE WITH LAWS. The, Company shall comply, and
cause each Subsidiary to comply, in all material respects with all
applicable laws, rules, regulations and orders of any governmental
authority, noncompliance with which could materially adversely affect
its business or condition, financial or otherwise, except noncompliance
being contested in good faith through appropriate proceedings so long
as the Company shall have set up sufficient reserves, if any, required
under generally accepted accounting principles with respect to such
items.
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company
shall keep, and cause each Subsidiary to keep, adequate records and
books of account in accordance with generally accepted accounting
principles consistently applied.
(f) MAINTENANCE OF PROPERTIES. The Company shall maintain
and preserve, and cause each Subsidiary to maintain and preserve, all
of its properties, necessary or useful in the proper conduct of its
business, in good repair, working order and condition, ordinary wear
and tear excepted.
(g) INSPECTION. The Company shall, upon receipt of
reasonable notice and subject to reasonable security measures, permit
Greenwich and any of its respective representatives to visit and
inspect any of the properties of the Company or any Subsidiary during
normal business hours, including, without limitation, their books and
records (and to make extracts therefrom and copies thereto) and to
discuss the Company's affairs, finances and accounts with its officers,
employees and independent public accountants.
4.2 LISTING OF THE COMPANY'S COMMON STOCK ON A NATIONAL EXCHANGE.
Upon the Closing and at such time as the Company first meets the initial
inclusion listing requirements, the Company will use its best efforts to list
shares of the Company's Common Stock on The Nasdaq Small Cap Market or on
another national securities exchange such as the Nasdaq National Market System,
the American Stock Exchange or the New York Stock Exchange. The Company shall,
at a minimum, use its best efforts to maintain such listing for a period of five
(5) years from the time of such listing,
4.3 AUDITED FINANCIAL STATEMENTS OF THE COMPANY. Upon the Closing,
the Company shall use its best efforts to have the Company's financial
statements audited by a "Big Five" or such other independent public accounting
firm as Greenwich may consent to. Further, the Company shall not effect a change
in its independent public accounting firm to other than a "Big Five" firm for a
two (2) year period following the Closing.
4.4 COSTS AND EXPENSES OF REGISTRATION OF THE SHARES. The Company
shall be responsible for and bear all expenses directly and necessarily incurred
in connection with the registration of the Shares as provided for in the
Registration Rights Agreement, attached hereto as EXHIBIT "C",
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4.5 DAILY TRANSFER SHEETS. For a period of three (3) years from
the Closing, the Company, at its expense, shall upon request from Greenwich,
provide Greenwich with copies of the Company's daily transfer sheets.
ARTICLE 5.
NEGATIVE COVENANTS OF THE COMPANY
5.1 NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that following
the Closing until Greenwich no longer owns the Shares, it will perform and
observe the following covenants and provisions and will cause each Subsidiary to
perform and observe such of the following covenants and provisions as are
applicable to such Subsidiary:
(a) LIQUIDATION, RECAPITALIZATION, ETC.. The Company
shall not, and shall not permit any of its Subsidiaries to, liquidate,
dissolve or effect a recapitalization or reorganization in any form of
transaction without the prior written consent of Greenwich, provided,
however, that such prohibition shall not prevent the Company from
transferring assets to wholly-owned subsidiaries of the Company or of
other wholly-owned subsidiaries of the Company in the ordinary course
of business.
(b) BUDGETS AND BOARD APPROVAL. Prior to the commencement
of each fiscal year, the Company shall prepare and submit to, and
obtain the approval of a majority of the Board of Directors of a budget
for the upcoming fiscal year, including projections of capital and
operating expenses, cash flow, and profits and losses, all itemized in
reasonable detail for the Company and its Subsidiaries on a
consolidated basis.
(c) INDEMNIFICATION PROVISIONS; DIRECTOR INSURANCE. The
Articles of Incorporation or Bylaws of the Company shall at all times
provide for the indemnification of members of the Board of Directors to
the full extent provided by law of the State of Nevada. The Company
shall purchase and maintain insurance on behalf of each individual who
is or was a director of the Company against liability asserted against
or incurred by him in that capacity or arising from his status as a
director, whether or not the Company would have power to indemnify him
against the same liability under applicable law.
(d) DEALINGS WITH AFFILIATES AND OTHERS. The Company
shall not, and shall not permit any Subsidiary to (i) enter into any
transaction, including, without limitation, any loans or extensions of
credit or royalty agreements, with any officer, director or stockholder
of the Company or any member of their respective immediate families or
any corporation or other entity directly or indirectly controlled by
one or more of such officer, directors, stockholders or members of
their immediate families unless such transaction is approved in advance
by a majority of disinterested members of the Board of Directors, or
(ii) use any proceeds from the sale of the Shares contemplated hereby
to repay any indebtedness of the Company,
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including, but not limited to, any indebtedness to current executive
officers or principal stockholders of the Company.
(e) CONSIDERATION FOR ISSUANCE OF SHARES. The Company
shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, for consideration,
the amount of which is less than fair market value, as determined in
good faith by the Board of Directors, (i) any share of Common Stock,
(ii) any other equity security of the Company, including, without
limitation, shares of preferred stock, (iii) any debt security of the
Company that by its terms is convertible into or exchangeable for any
equity security of the Company, (iv) any security of the Company that
is a combination of debt and equity, or (v) any option, warrant or
other right to subscribe for, purchase or otherwise acquire any equity
security or any such debt security, except for shares of Common Stock
issued upon any subdivision or combination of shares of Common Stock.
(f) NEGATIVE PLEDGE. Neither the Company nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset
now owned or hereafter acquired by it, without the prior written
consent of Greenwich, except for liens securing Indebtedness in an
amount of up to $100,000 and except for purchase money security
interests incurred in the ordinary course of business to acquire
equipment used in the Company's operations which shall not, in the
aggregate, exceed $10,000,000.
(g) LIMITATION ON INDEBTEDNESS. Without the prior written
consent of Greenwich, neither the Company nor any Subsidiary shall
incur, guarantee or otherwise become liable with respect to any
Indebtedness except: (i) trade liabilities arising out of the ordinary
course of business; and (ii) Indebtedness to redeem the Series D
Preferred Stock.
(h) LIMITATION ON ISSUANCE OF EQUITY SECURITIES. Without
the prior written consent of Greenwich, neither the Company nor any
Subsidiary shall issue any shares of any class or series of its equity
securities except for the Shares, the shares of Common Stock underlying
the Warrant and the shares of Common Stock into which the Series A, B,
C and D Preferred Stock are convertible in accordance with the terms
thereof.
(i) LIMITATION ON DISTRIBUTIONS. Without the prior
written consent of Greenwich, the Company shall not pay any dividend or
make any other distributions with respect to or purchase or redeem any
shares of its capital stock except for the payment of dividends on the
Preferred Stock in accordance with its terms.
(j) LIMITATION ON REDEMPTION OF DEBT. Without the prior
written consent of Greenwich, the Company shall not, and shall not
permit any Subsidiary to, redeem or purchase any Indebtedness issued by
it prior to the stated maturity date thereof except as may be approved
by a majority of the Board of Directors.
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(k) LIMITATIONS ON AMENDMENTS. Without the prior written
consent of Greenwich, the Company shall not amend any provision of its
Articles of Incorporation, as amended through the date of this
Agreement, or its Bylaws, as amended through the date of this
Agreement, except for any such amendment necessary in connection with
the transactions contemplated hereby.
(l) LIMITATIONS ON COMPANY ACTIONS. Without the prior
written Consent of Greenwich, the Company shall not, and shall not
permit any Subsidiary to, (i) consolidate or merge with or into any
other corporation, entity or Person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its
properties or assets unless (w) the successor company is a U.S.
corporation, (x) the Shares held Greenwich shall be converted into or
exchanged for and shall become shares of the successor company having
substantially the same powers, preferences, tradeability and relative
rights and qualifications that the Shares held by Greenwich had
immediately prior to such transaction, (y) the consolidated net worth
of the successor company immediately after the transaction on a pro
forma basis will be equal to or greater than the net worth of the
Company immediately preceding the combination transaction and (z) the
Company shall deliver to the transfer agent for the Company, prior to
the consummation of the proposed combination transaction, an officer's
certificate and opinion of counsel, from legal counsel reasonably
acceptable to Greenwich, to the effect that such sale, transfer or
combination complies with the terms and conditions of this Section
5.1(l)(i), (ii) make any loan or advance to, any Person, including,
without limitation any employee, director or stockholder of the Company
or any Subsidiary, except advances made in the ordinary course of
business to a wholly-owned Subsidiary of the Company, (iii) take any
action to effect the dissolution, winding up, or liquidation of the
Company, or to initiate any proceedings in the nature of bankruptcy,
receivership, or insolvency proceedings of any kind, (iv) make any
material changes in the compensation of the employees, officers, and
directors of the Company, or (v) engage in any activity outside the
ordinary course of the Company's business or that may have a
detrimental effect on the Company.
(m) PHANTOM STOCK. The Company shall not create any right
to acquire an equity interest, or any interest measured by income,
profits or any results of operations or by the value of any stock, or
any similar or related right of interest.
(n) ASSET SALES. The Company shall not, and shall not
permit any Subsidiary to sell, lease or otherwise dispose of any of its
or their respective properties or assets except sales, leases or other
dispositions (i) made in the ordinary course of the Company's business
or (ii) approved by Greenwich.
(o) SUBSIDIARIES. As long Greenwich owns any of the
Shares, the Company shall not, and shall not permit any subsidiary to,
create any subsidiary. The Company shall not cause or permit any
subsidiary to cease to be a wholly-owned subsidiary without the consent
of Greenwich.
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5.2 EMPLOYEE STOCK OPTIONS. For a period of eighteen (18) months
after Closing, the Company will not, without the prior written consent of
Greenwich, grant any options to purchase securities of the Company to employees
that are exercisable at a price below the greater of USD $1.25 per share or the
fair market value of the securities on the date of grant. The foregoing
restriction will not apply to certain options granted to Randy K. Johnson, Esq.,
B.J. Mendenhall and Lewis G. Migliore as indicated in SCHEDULE 3.18(a) attached
hereto.
5.3 SALES OF SECURITIES UNDER REGULATION S. For a period of three
(3) years following the Closing, the Company will not, without the prior written
consent of Greenwich, offer or sell any of its securities in reliance on
Regulation S of the Securities Act of 1933, as amended.
5.4 REPAYMENT OF COMPANY INDEBTEDNESS. The Company will not use
any proceeds from the sale of the Shares to repay any indebtedness of the
Company, including but not limited to any indebtedness to current executive
officers or principal shareholders of the Company except for indebtedness
incurred in the ordinary course of business.
5.5 PRESS RELEASES. Any press releases or other publicity proposed
by the Company shall be sent to Greenwich at least three (3) hours before such
press release or publicity is published or released.
5.6 SALES BELOW GREENWICH PURCHASE PRICE. The Company will not
sell any of its securities at a price lower than USD $1.25 per share for a
period of twenty-four (24) months from the Closing, without the prior written
consent of Greenwich.
ARTICLE 6.
OTHER REQUIREMENTS OF THE COMPANY
6.1 REPORTING REQUIREMENTS. The Company will furnish to Greenwich,
upon the written request of Greenwich, the following for so long as Greenwich
owns any Shares:
(a) copies of its annual reports on Form 10-KSB, its
quarterly reports on Form 10-QSB, its proxy statement and any reports
on Form 8-K, including all exhibits thereto and copies of all documents
incorporated by reference therein, all within seven days of filing such
reports with the Securities and Exchange Commission;
(b) within thirty (30) days after the close of each
calendar month, except with respect to the last month of each fiscal
year, a copy of its consolidated balance sheet as of the close of such
month and its profit and loss statement and surplus reconciliation for
that month, all prepared in accordance with GAAP consistently applied,
and certified as being fairly presented in all material respects by the
Company's President or its Chief Financial Officer;
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(c) within thirty (30) days after the close of each
calendar month, a copy of the internal accounting reports prepared by
the Company for its officers and directors;
(d) at any time within the period from thirty (30) days
prior to and until thirty (30) days after the start of any fiscal year,
financial projections of the Company and its subsidiaries, if any, for
such fiscal year prepared in reasonable detail, which financial
projections shall be presented to the Company's Board of Directors for
their approval at their regular meeting first following the preparation
of such projections;
(e) promptly after an overt threat or the commencement
thereof notice of all actions, suits and proceedings before any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that might result in a material
adverse effect on the Company and its Subsidiaries taken as a whole;
(f) at least 30 days prior to commencement of each fiscal
year of the Company, a copy of the operating plan and budget;
(g) within five business days after the Company learns of
any circumstance or event which reasonably can be expected to have a
material adverse effect an the assets, properties, liabilities,
financial condition, results of operations, business, or prospects of
the, Company, written notice of the, nature and extent of such
circumstance or event; and
(h) within ten business days after Greenwich makes a
request therefore, such other data relating to the business, affairs
and financial condition of the Company or its Subsidiaries.
6.2 BOARD REPRESENTATION. During the shorter of five (5) years
following the Closing or for so long as Greenwich owns any Shares, Greenwich
shall have the right to designate one (1) director to the Board of Directors and
the Company shall cause such designee to be elected to the Board of Directors.
Further, the Company shall use its best efforts to have at least two (2) outside
directors on its Board within ninety (90) days of the Closing.
6.3 ACTIONS REQUIRING BOARD CONSIDERATION. Without in any way
limiting the generality of matters which may be appropriate for consideration or
action by the Board of Directors, prior to taking action with respect to any of
the following items, the Board of Directors or, in the case of Sections 6.3(a)
and (b), the Compensation Committee thereof, must approve the following actions:
(a) The compensation of the executive officers of the
Company as well as changes in officers and their compensation,
including, without limitation, all significant employee benefits other
than health care and similar insurance plans;
(b) All incentive programs (and revisions thereto) for
employees such as stock option plans, equity plans, bonus plans, etc.;
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(c) Company budgets, which shall be submitted within the
period from thirty (30) days prior to and until thirty (30) days after
the commencement of each fiscal year covering sales, direct costs,
indirect costs, profit targets, capital expenditures, and cash flow;
(d) Major appropriations in excess of One Hundred
Thousand Dollars ($100,000.00) for any capital items not in the Company
budget for the fiscal year;
(e) Major new facilities and their location, excluding
any small leased facilities in the local area so long as their annual
rental obligation does not exceed One Hundred Thousand Dollars
($100,000.00) per year;
(f) All matters pertaining to mergers and acquisitions,
without exception;
(g) Purchase contracts of a major nature;
(h) Sales contracts of an unusual size or complexity;
(i) Sale or purchase of patents, rights, or any royalty
or license agreements, other than in the ordinary course of business;
(j) Warranty and distribution policies of an unusual
nature which are not representative of industry patterns;
(k) Financing programs and policies applicable to public
offerings, private placements, and long-term debt;
(l) Treasury policies;
(m) Selection of auditors and corporate counsel;
(n) Banking resolutions;
(o) Cash policies such as pension funds, investments,
etc., other than normal bank deposits;
(p) All matters of litigation in which the Company is to
be the plaintiff or other initiating party; and
(q) Conflict of interest matters.
6.4 MANAGEMENT CONSULTATION WITH BOARD OF DIRECTORS. The management of
the Company shall notify and consult with the Board of Directors (by written,
telegraphic or telephonic notice) prior to taking any initial action with
respect to any of the following matters (it being understood that
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the Board of Directors will determine the propriety of further or alternative
action with respect to such matters at their next meeting):
(a) All matters of personnel policies as they apply to
any labor agreements or organization of unions;
(b) All matters of public policy, wherein the Company is
to be involved in any community, political, or religious cause or
program;
(c) All matters of litigation that involve or may involve
the Company as a defendant;
(d) Audit programs and policies; and
(e) Any operating decisions which in the judgment of the
President and Chief Executive Officer should be presented to the Board.
6.5 LOCK-UP AGREEMENTS FOR KARREN AND HOPKINS. At the Closing,
Gaylord Karren ("Karren") and John Hopkins ("Hopkins"), both senior executives
of the Company, as an inducement to Greenwich to purchase the Shares, shall
deliver executed Lock-Up Agreements in the form set forth in EXHIBIT "E". The
shares subject to the Lock-Up Agreements shall not be assignable or
transferrable except in accordance with the terms thereof. The Company shall
take all such steps necessary to enforce the provisions of the Lock-Up
Agreements, including but not limited to, notifying the Company's transfer agent
of the existence of the Lock-Up Agreements.
6.6 KEY MAN LIFE INSURANCE. Upon the Closing, the Company shall
cause at least One Million Dollars (USD $1,000,000.00) of "key man" life
insurance to be written on the life of Karren. Such "key man" life insurance
policy shall be payable to the Company in the event of Karren's death and shall
be kept in force for a minimum period of either three (3) years from the Closing
or the term of the employment agreement between Karren and the Company,
whichever is longer.
ARTICLE 7.
MERGERS AND ACQUISITIONS
7.1 INTRODUCED TRANSACTION. The Company agrees that Greenwich will
be paid a finder's fee of five percent (5%) of the first $1,000,000.00, four
percent (4%) of the second $1,000,000.00, three percent (3%) of the next
$1,000,000.00, two percent (2%) of the next $1,000,000.00 and one percent (1%)
of the excess, if any, over $4,000,000.00 of the consideration involved in any
merger or acquisition transaction (or equivalent) consummated by the Company, in
which Greenwich introduced the other party to the Company during a period ending
five (5) years from the Closing (an "Introduced Transaction").
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7.2 PAYMENT OF FINDER'S FEE. Any such finder's fee due to
Greenwich will be paid in cash at the closing of the particular Introduced
Transaction for which the finder's fee is due.
ARTICLE 8.
DEFINITIONS AND ACCOUNTING TERMS
8.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Securities Purchase Agreement as from
time to time amended and in effect between the parties.
"Board of Directors" shall mean the then present members of
the Board of Directors of the Company.
"Company" means and shall include Venturi Technologies, Inc.,
a corporation organized and existing under the laws of the State of Nevada, and
its successors and assigns.
"ERISA" means the federal Employee Retirement Income Security
Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Securities and Exchange Commission (or of any other federal agency then
administering the Exchange Act) thereunder, all as the same shall be in effect
at the time.
"GAAP" means generally accepted accounting principles as
applied in the United States of America at the time of determination thereof.
"Indebtedness" means any and all indebtedness of the Company:
(i) in respect of borrowed money (whether or not the recourse of the lender is
to the whole of the assets of the Company or only to a portion thereof); (ii)
evidenced by bonds, notes, debentures or similar instruments, or representing
the balance deferred and unpaid of the purchase price of any property that
constitutes debt in accordance with GAAP; (iii) reflecting any obligation of the
Company to pay future rentals or other payments with respect to any property or
otherwise which obligation would be required to be capitalized in accordance
with GAAP; (iv) any right in respect of the Company which is convertible into
any such obligation; (v) all such obligations of third parties which the Company
has directly or indirectly incurred, assumed, guaranteed or otherwise become
liable for, and (vi) including the deferred purchase price of assets or services
payable to the sellers thereof or any of such sellers' assignees which in
accordance with GAAP would be shown on the liabilities side of
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the balance sheet of such person (but excluding deferred rent as determined in
accordance with GAAP and deferred, federal or state income taxes) and the face
amount of all letters of credit issued for the account of such person and,
without duplication, all drafts drawn thereunder.
"Indemnitees" shall have the meaning assigned to that term in
Section 6.1.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing), any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute and any lease having substantially the same effect
as the foregoing.
"Loss" and "Losses" shall have the meanings assigned to such
terms in Section 6.1 hereof.
"Person" means an individual, corporation, partnership, joint
venture, trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Greenwich" means Greenwich, AG.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Securities
and Exchange Commission (or of other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at the time.
"Shares" shall have the meaning assigned to that term in
Section 1.1 hereof.
"Subsidiary" or "Subsidiaries" means any corporation, 50% or
more of the outstanding voting stock of which shall at the time of determination
be owned by the Company or by one or more Subsidiaries, or any other entity or
enterprise, 50% or more of the equity of which shall at the time of
determination be owned by the Company or by one or more Subsidiaries; PROVIDED
that with respect to the Company, as long as any of the Shares purchased by
Greenwich hereunder remain outstanding the Company must own 100% of the equity
of such entity.
"Warrant" shall have the meaning assigned to that term in
Section 1.2 hereof.
8.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
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ARTICLE 9.
INDEMNIFICATION BY THE COMPANY
9.1 INDEMNIFICATION. Notwithstanding anything in this Agreement to
the contrary, each party hereto (an "Indemnifying Party") shall indemnify,
defend and hold the other party and its officers, members and affiliates
(individually, an "Indemnitee" and collectively, the "Indemnitees", harmless
from and against any and all demands, claims, actions, lawsuits, obligations,
losses, liabilities, damages, costs and expenses whatsoever (including, without
limitation, any fines, penalties and attorneys' fees and other expenses incurred
in investigating and defending any of the foregoing or enforcing this Agreement)
(all such demands, claims, actions, lawsuits, obligations, losses, liabilities,
damages, costs and expenses are herein collectively referred to as "Losses" and
individually referred to as a "Loss" asserted against. imposed upon or incurred
by an Indemnitee by reason of or in connection with (a) any inaccuracy in, or
breach of any of the representations or warranties of the Indemnifying Party set
forth in this Agreement or the Exhibits or Schedules hereto, and (b) any breach
by the Indemnifying Party of any of its covenants, obligations or agreements
contained in this Agreement or in any other instrument or document delivered in
connection with the transactions contemplated by this Agreement.
ARTICLE 10.
MISCELLANEOUS
10.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the
part of Greenwich, or any other holder of the Shares in exercising any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
10.2 NOTICE. All notices, requests, demands, consents, approvals,
agreements, or other communications to or by a party to this Agreement shall (i)
be in writing addressed to the authorized address of the recipient set out in
this Section 10.2 or to such other address as it may have notified the sender,
(ii) be signed by an authorized officer of the sender, and (iii) be delivered in
person or sent by registered or certified mail, postage prepaid, return receipt
requested or by facsimile transmission. Any such communication shall duly given
or made (A) in the case of delivery in person when actually received by the
recipient, (B) in the case of mailing, three days after delivery to the U.S.
Postal Service or (C) in the case of facsimile transmission, when received in
legible form by the recipient at the fax number set forth below and when the
recipient has been requested to acknowledge receipt of the entire facsimile
transmission, upon the sending and receiving of the acknowledgment of receipt
(which acknowledgment the recipient will promptly give); but if such delivery or
dispatch is later than 5:00 pm local time on a day on which business is
generally carried on in the place to which such communication is sent or occurs
on a day on, which business is not generally carried on in the place
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to which such communication is sent, it will be deemed to have been duly given
or made at the commencement of business on the next day on which business is
generally carried on in that place.
If to the Company: Venturi Technologies, Inc.
1327 North State
Orem, Utah 84057
Attention: Gaylord Karren, CEO
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
with a copy to: Randy K. Johnson, Esq.
Mackey, Price & Williams
170 S. Main Street
Suite 900
Salt Lake City, Utah 84101-1655
Telephone: (801) 575-5000
Telecopier: (801) 575-5006
If to Greenwich: Greenwich, AG
Neuer Wall 32
20354 Hamburg, Germany
Attention: Dr. Rainer Bischoff
Telephone: 011-49-40-37-50-23-30
Telecopier: 011-49-40-37-50-23-32
with a copy to: I. Bobby Majumder, Esq.
Gardere & Wynne L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Telephone: (214) 999-3000
Telecopier: (214) 999-4667
10.3 COSTS, EXPENSES AND TAXES. The Company shall pay any and
all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement, the Shares, the Warrant
and other instruments and documents to be delivered hereunder or thereunder
and agrees to hold Greenwich harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission
to pay such taxes and filing fees.
10.4 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Company and Greenwich and its respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of Greenwich.
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10.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement, the Shares, the Warrant
or any other instrument or document delivered in connection herewith or
therewith, shall survive the execution and delivery hereof or thereof.
10.6 PRIOR AGREEMENTS. This Agreement constitutes the entire
agreement between the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof This Agreement can only be
modified, including any extension of the offering period, by a written agreement
duly signed by persons authorized to sign agreements on behalf of the respective
parties.
10.7 SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability or any
other provision.
10.8 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the substantive laws of the State of Texas without
giving effect to the conflict of law provisions thereof.
10.9 HEADINGS. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purposes.
10.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.11 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of Greenwich, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
10.12 ATTORNEYS' FEES. If any action is necessary to enforce or
interpret the terms of this agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs, in addition to any other relief to which
he is or may be entitled. This provision shall be construed as applicable to the
entire agreement.
10.13 REMEDIES. Each party hereto, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive (to the extent permitted by law) the defense in any
action for specific performance that a remedy of law would be adequate.
10.14 TIME OF ESSENCE. Time shall be of the essence of this
Agreement.
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10.15 JOINT DRAFTING OF AGREEMENT. This Agreement has been prepared
by the joint efforts of the respective counsel for each of the parties hereto
and shall not be construed against a particular party simply by reason of such
party being the drafting party.
10.16 FACSIMILE SIGNATURE. This Agreement may be executed by
facsimile copy and any such facsimile copy bearing the facsimile signature of
any party hereto shall have full legal force and effect and shall be binding
against the party having executed this Agreement by facsimile.
IN WITNESS WHEREOF the undersigned have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
VENTURI TECHNOLOGIES, INC.
By: /s/ GAYLORD KARREN
---------------------------------------
Title: CEO
------------------------------------
GREENWICH, AG.
By: /s/ DANIEL DORNIER
---------------------------------------
DANIEL DORNIER, Chief Executive Officer
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REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of the 3rd day of June, 1999 by and between VENTURI
TECHNOLOGIES, INC., a Nevada corporation (the "Company") and, GREENWICH, AG,
a German company (the "Shareholder").
R E C I T A L S:
WHEREAS, the Shareholder is acquiring (i) One Million Six Hundred
Thousand (1,600,000) shares (the "Common Shares") of the Company's common
stock, par value $0.001 per share (the "Common Stock"), pursuant to that
certain Securities Purchase Agreement by and between the Company and the
Shareholder of even date herewith (the "Securities Purchase Agreement") and
(ii) a Warrant to purchase up to Twenty Two Thousand Eight Hundred Six
(22,806) shares of Common Stock (the"Warrant Shares")(the Warrant Shares and
the Common Shares are collectively referred to herein as the "Shares"); and
WHEREAS, the Company desires to grant to the Shareholder certain
registration rights relating to the Shares and the Shareholder desires to
obtain such registration rights, subject to the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS AND REFERENCES. For purposes of this Agreement, in
addition to the definitions set forth above and elsewhere herein, the following
terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the 1933
Act (as herein defined) and the declaration or ordering of
effectiveness of such registration statement or document.
(c) For purposes of this Agreement, the term "Registrable
Stock" shall mean (i) the Common Shares, (ii) the Warrant Shares, (iii)
any shares of Common Stock issued by way of a stock split,
reorganization, merger or consolidation, and (iv) any Common Stock
issued as a dividend on the Shares. For purposes of this Agreement, any
Registrable Stock shall cease to be Registrable Stock when (v) a
registration statement covering such Registrable Stock has been
declared effective and such Registrable Stock has been disposed of
pursuant
<PAGE>
to such effective registration statement, (w) such Registrable Stock is
sold pursuant to Rule 144 (or any similar provision then in force)
under the 1933 Act, (x) such Registrable Stock is eligible to be sold
pursuant to Rule 144(k) under the 1933 Act, (y) such Registrable Stock
has been otherwise transferred, no stop transfer order affecting such
stock is in effect and the Company has delivered new certificates or
other evidences of ownership for such Registrable Stock not bearing any
legend indicating that such shares have not been registered under the
1933 Act, or (z) such Registrable Stock is sold by a person in a
transaction in which the rights under the provisions of this Agreement
are not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this Agreement
are assigned in accordance with Section 10 hereof, PROVIDED that the
Shareholder or such transferee or assignee shall then own the
Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act of
1933, as amended.
(f) An "affiliate of such Holder" shall mean a person who
controls, is controlled by or is under common control with a Holder, or
the spouse or children (or a trust exclusively for the benefit of the
spouse and/or children) of a Holder, or, in the case of a Holder that
is a partnership, its partners.
(g) The term "Person" shall mean an individual,
corporation, partnership, trust, limited liability company,
unincorporated organization or association or other entity, including
any governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate at least a majority of the Registrable
Stock.
(i) References in this Agreement to any rules,
regulations or forms promulgated by the Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or
not bearing the same designation.
2. DEMAND REGISTRATION.
(a) Commencing as of the date first written hereinabove,
any Requesting Holders may make a written request to the Company
(specifying that it is being made pursuant to this Section 2) that the
Company file a registration statement under the 1933 Act (or a similar
document pursuant to any other statute then in effect corresponding to
the 1933 Act) covering the registration of Registrable Stock. In such
event, the Company shall (x) within ten (10) days thereafter notify in
writing all other Holders of Registrable Stock of such request, and (y)
use its best efforts to cause to be registered under the 1933 Act all
Registrable Stock that the Requesting Holders and such other Holders
have, within forty-five (45) days after the Company has given such
notice, requested be registered.
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(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an underwritten
offering, they shall so advise the Company as a part of their request
pursuant to Section 2.(a) above, and the Company shall include such
information in the written notice referred to in clause (x) of Section
2.(a) above. In such event, the Holder's right to include its
Registrable Stock in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten offering to the
extent provided in this Section 2. All Holders proposing to distribute
Registrable Stock through such underwritten offering shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be selected by a
majority in interest of the Requesting Holders and shall be approved by
the Company, which approval shall not be unreasonably withheld;
PROVIDED, that all of the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
shall be conditions precedent to the obligations of such Holders; and
PROVIDED FURTHER, that no Holder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such Holder, the Registrable Stock of such Holder and such
Holder's intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section 2
to the contrary, if the managing underwriter of an underwritten
offering of the Registrable Stock requested to be registered pursuant
to this Section 2 advises the Requesting Holders in writing that in its
opinion marketing factors require a limitation of the number of shares
to be underwritten, the Requesting Holders shall so advise all Holders
of Registrable Stock that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Stock that may be
included in such underwritten offering shall be allocated among all
such Holders, including the Requesting Holders, in proportion (as
nearly as practicable) to the amount of Registrable Stock requested to
be included in such registration by each Holder at the time of filing
the registration statement; PROVIDED, that in the event of such
limitation of the number of shares of Registrable Stock to be
underwritten, the Holders shall be entitled to an additional demand
registration pursuant to this Section 2. If any Holder of Registrable
Stock disapproves of the terms of the underwriting, such Holder may
elect to withdraw by written notice to the Company, the managing
underwriter and the Requesting Holders. The securities so withdrawn
shall also be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to
the contrary, the Company shall not be required to effect a
registration pursuant to this Section 2 during the period starting with
the fourteenth (14th) day immediately preceding the date of an
anticipated filing by the Company of, and ending on a date ninety (90)
days following the effective date of, a registration statement
pertaining to a public offering of securities for the
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account of the Company; PROVIDED, that the Company shall actively
employ in good faith all reasonable efforts to cause such registration
statement to become effective; and PROVIDED FURTHER, that the Company's
estimate of the date of filing such registration statement shall be
made in good faith.
(e) The Company shall be obligated to effect and pay for
a total of only one (1) registration pursuant to this Section 2, unless
increased pursuant to Section 2.(c) hereof; PROVIDED, that a
registration requested pursuant to this Section 2 shall not be deemed
to have been effected for purposes of this Section 2.(e), unless (i) it
has been declared effective by the Commission, (ii) if it is a shelf
registration, it has remained effective for the period set forth in
Section 3.(b), (iii) the offering of Registrable Stock pursuant to such
registration is not subject to any stop order, injunction or other
order or requirement of the Commission (other than any such action
prompted by any act or omission of the Holders), and (iv) no limitation
of the number of shares of Registrable Stock to be underwritten has
been required pursuant to Section 2.(c) hereof.
3. OBLIGATIONS OF THE COMPANY. Whenever required under Section 2
to use its best efforts to effect the registration of any Registrable Stock, the
Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later than
ninety (90) days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a registration
statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate and which form shall be
available for the sale of such issue of Registrable Stock in accordance
with the intended method of distribution thereof, and use its best
efforts to cause such registration statement to become effective as
promptly as practicable thereafter; PROVIDED that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company will (i) furnish to one (1) counsel selected by
the Requesting Holders copies of all such documents proposed to be
filed, and (ii) notify each such Holder of any stop order issued or
threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective for such period of time as would satisfy the
holding period requirements of Rule 144(k) promulgated by the
Commission with respect to the Shares or such shorter period which will
terminate when all Registrable Stock covered by such registration
statement has been sold (but not before the expiration of the forty
(40) or ninety (90) day period referred to in Section 4(3) of the 1933
Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
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(c) furnish to each Holder and any underwriter of
Registrable Stock to be included in a registration statement copies of
such registration statement as filed and each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Stock
owned by such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws of such
jurisdictions as any selling Holder or any underwriter of Registrable
Stock reasonably requests, and do any and all other acts which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in such jurisdictions of the Registrable Stock owned by
such Holder; PROVIDED that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.(d) hereof,
(ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with or
approved by such other governmental agencies or other authorities as
may be necessary by virtue of the business and operations of the
Company to enable the selling Holders thereof to consummate the
disposition of such Registrable Stock;
(f) notify each selling Holder of such Registrable Stock
and any underwriter thereof, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act (even if such
time is after the period referred to in Section 3.(b)), of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Stock, such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances being made not misleading;
(g) make available for inspection by any selling Holder,
any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"),
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector, as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, in connection with such registration statement. Records
or other information which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are
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confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records or other information is necessary to avoid
or correct a misstatement or omission in the registration statement, or
(ii) the release of such Records or other information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Each selling Holder shall, upon learning that disclosure
of such Records or other information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Records or other information deemed confidential;
(h) furnish, at the request of any Requesting Holder, on
the date that such shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Stock is not being sold through underwriters, on the date
that the registration statement with respect to such shares of
Registrable Stock becomes effective, (1) a signed opinion, dated such
date, of the legal counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and if such
Registrable Stock is not being sold through underwriters, then to the
Requesting Holders as to such matters as such underwriters or the
Requesting Holders, as the case may be, may reasonably request and as
would be customary in such a transaction; and (2) a letter dated such
date, from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and if such Registrable Stock is
not being sold through underwriters, then to the Requesting Holders
and, if such accountants refuse to deliver such letter to such Holder,
then to the Company (i) stating that they are independent certified
public accountants within the meaning of the 1933 Act and that, in the
opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting
requirements of the 1933 Act, and (ii) covering such other financial
matters (including information as to the period ending not more than
five (5) business days prior to the date of such letter) with respect
to the registration in respect of which such letter is being given as
the Requesting Holders may reasonably request and as would be customary
in such a transaction;
(i) enter into customary agreements (including if the
method of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration
statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of at
least twelve (12) months beginning with the first full month after the
effective date of such registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the 1933
Act; and
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(k) use its best efforts to cause all such Registrable
Stock to be listed on the Nasdaq SmallCap Market and/or any other
national securities exchange on which similar securities issued by the
Company are then listed or traded.
The Company may require each selling Holder of Registrable Stock as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Stock as the Company
may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3.(f) hereof, such
Holder will forthwith discontinue disposition of Registrable Stock pursuant to
the registration statement covering such Registrable Stock until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.(f) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3.(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3.(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 3.(f) hereof.
4. INCIDENTAL REGISTRATION. Commencing immediately after the date
of Closing (as defined in the Securities Purchase Agreement), if the Company
determines that it shall file a registration statement under the 1933 Act (other
than a registration statement on a Form S-4 or S-8 or filed in connection with
an exchange offer or an offering of securities solely to the Company's existing
stockholders) on any form that would also permit the registration of the
Registrable Stock and such filing is to be on its behalf and/or on behalf of
selling holders of its securities for the general registration of its common
stock to be sold for cash, at each such time the Company shall promptly give
each Holder written notice of such determination setting forth the date on which
the Company proposes to file such registration statement, which date shall be no
earlier than thirty (30) days from the date of such notice, and advising each
Holder of its right to have Registrable Stock included in such registration.
Upon the written request of any Holder received by the Company no later than
twenty (20) days after the date of the Company's notice, the Company shall use
its best efforts to cause to be registered under the 1933 Act all of the
Registrable Stock that each such Holder has so requested to be registered. If,
in the written opinion of the managing underwriter or underwriters (or, in the
case of a non-underwritten offering, in the written opinion of the placement
agent, or if there is none, the Company), the total amount of such securities to
be so registered, including such Registrable Stock, will exceed the maximum
amount of the Company's securities which can be marketed (i) at a price
reasonably related to the then current market value of such securities, or (ii)
without otherwise materially and adversely affecting the entire offering, then
the amount of Registrable Stock to be offered for the accounts of Holders shall
be reduced pro rata to the extent
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necessary to reduce the total amount of securities to be included in such
offering to the recommended amount; PROVIDED, that if securities are being
offered for the account of other Persons as well as the Company, such reduction
shall not represent a greater fraction of the number of securities intended to
be offered by Holders than the fraction of similar reductions imposed on such
other Persons other than the Company over the amount of securities they intended
to offer.
5. HOLDBACK AGREEMENT - RESTRICTIONS ON PUBLIC SALE BY HOLDER.
(a) To the extent not inconsistent with applicable law,
each Holder whose Registrable Stock is included in a registration
statement agrees not to effect any public sale or distribution of the
issue being registered or a similar security of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the 1933 Act,
during the fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of such registration statement
(except as part of the registration), if and to the extent requested by
the Company in the case of a nonunderwritten public offering or if and
to the extent requested by the managing underwriter or underwriters in
the case of an underwritten public offering.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND
OTHERS. The Company agrees (i) not to effect any public sale or
distribution of any securities similar to those being registered, or
any securities convertible into or exchangeable or exercisable for such
securities, during the fourteen (14) days prior to, and during the
ninety (90) day period beginning on, the effective date of any
registration statement in which Holders are participating (except as
part of such registration), if and to the extent requested by the
Holders in the case of a non-underwritten public offering or if and to
the extent requested by the managing underwriter or underwriters in the
case of an underwritten public offering; and (ii) that any agreement
entered into after the date of this Agreement pursuant to which the
Company issues or agrees to issue any securities convertible into or
exchangeable or exercisable for such securities (other than pursuant to
an effective registration statement) shall contain a provision under
which holders of such securities agree not to effect any public sale or
distribution of any such securities during the periods described in (i)
above, in each case including a sale pursuant to Rule 144 under the
1933 Act.
6. EXPENSES OF REGISTRATION. The Company shall bear all expenses
incurred in connection with each registration pursuant to Sections 2 and 4 of
this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and pay
the underwriting commissions and discounts applicable to the Registrable Stock
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Agreement.
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7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the full extent permitted by law, each Holder, its
officers, directors and agents and each Person who controls such Holder
(within the meaning of the 1933 Act) against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged
untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein (in case of a
prospectus or preliminary prospectus, in the light of the circumstances
under which they were made) not misleading. The Company will also
indemnify any underwriters of the Registrable Stock, their officers and
directors and each Person who controls such underwriters (within the
meaning of the 1933 Act) to the same extent as provided above with
respect to the indemnification of the selling Holders.
(b) INDEMNIFICATION BY HOLDERS. In connection with any
registration statement in which a Holder is participating, each such
Holder will furnish to the Company in writing such information with
respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company (within
the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein (in the
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission
is contained in any information with respect to such Holder so
furnished in writing by such Holder. Notwithstanding the foregoing, the
liability of each such Holder under this Section 7.(b) shall be limited
to an amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability arises out
of or is based on willful misconduct of such Holder.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of
any written notice of the commencement of any action, suit, proceeding
or investigation or threat thereof made in writing for which such
Person will claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified
party, a conflict of interest may exist between such indemnified party
and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claims with counsel
reasonably satisfactory to such indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld).
Failure by such Person to provide said notice to
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the indemnifying party shall itself not create liability except to the
extent of any injury caused thereby. No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect of such claim or litigation. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim, it will
not be obligated to pay the fees and expenses of more than one (1)
counsel with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(d) CONTRIBUTION. If for any reason the indemnity
provided for in this Section 7 is unavailable to, or is insufficient to
hold harmless, an indemnified party, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties; and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 7.(c), any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
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If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Sections 7.(a) and 7.(b) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 7.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. RULE 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder; and it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any Holder,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
10. TRANSFER OF REGISTRATION RIGHTS. The registration rights of
any Holder under this Agreement with respect to any Registrable Stock may be
transferred to any transferee of such Registrable Stock; PROVIDED that such
transfer may otherwise be effected in accordance with applicable securities
laws; PROVIDED FURTHER, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; PROVIDED FURTHER, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
PROVIDED FURTHER, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this Section
10, no transfer of Registrable Stock shall cause such Registrable Stock to lose
such status.
11. MERGERS, ETC. The Company shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation or reorganization, agree in writing
to assume the obligations of the Company under this Agreement, and for that
purpose references hereunder to "Registrable Stock" shall be deemed to be
references to the securities which the Holders would be entitled to receive in
exchange for Registrable Stock under any such merger, consolidation or
reorganization; PROVIDED, HOWEVER, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the
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surviving corporation if each Holder is entitled to receive in exchange for its
Registrable Stock consideration consisting solely of (i) cash, (ii) securities
of the acquiring corporation which may be immediately sold to the public without
registration under the 1933 Act, or (iii) securities of the acquiring
corporation which the acquiring corporation has agreed to register within ninety
(90) days of completion of the transaction for resale to the public pursuant to
the 1933 Act.
12. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not
hereafter enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the Holders in this
Agreement.
(b) REMEDIES. Each Holder, in addition to being entitled
to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive (to the
extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(c) AMENDMENTS AND WAIVERS. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of the Holders of
at least a majority of the Registrable Stock then outstanding affected
by such amendment, modification, supplement, waiver or departure.
(d) SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
(e) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Nevada applicable to contracts made and to be performed wholly within
that state, without regard to the conflict of law rules thereof.
(f) COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(g) HEADINGS. The headings in this Agreement are used for
convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
REGISTRATION RIGHTS AGREEMENT Page 12 of 14
- -----------------------------
<PAGE>
(h) NOTICES. Any notice required or permitted under this
Agreement shall be given in writing and shall be delivered in person or
by telecopy or by overnight courier guaranteeing no later than second
business day delivery, directed to (i) the Company at the address set
forth below its signature hereof or (ii) a Holder at the address of the
Administrator set forth below its signature hereof. Any party may
change its address for notice by giving ten (10) days advance written
notice to the other parties. Every notice or other communication
hereunder shall be deemed to have been duly given or served on the date
on which personally delivered, or on the date actually received, if
sent by telecopy or overnight courier service, with receipt
acknowledged.
(i) SEVERABILITY. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions
contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
(j) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
(k) ENFORCEABILITY. This Agreement shall remain in full
force and effect notwithstanding any breach or purported breach of, or
relating to, the Securities Purchase Agreement.
(l) RECITALS. The recitals are hereby incorporated in the
Agreement as if fully set forth herein.
13. FACSIMILE SIGNATURE. This Agreement may be executed by
facsimile copy and any such facsimile copy bearing the facsimile signature of
any party hereto shall have full legal force and effect and shall be binding
against the party having executed this Agreement by facsimile.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
REGISTRATION RIGHTS AGREEMENT Page 13 of 14
- -----------------------------
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written hereinabove.
VENTURI TECHNOLOGIES, INC.
By: /s/ GAYLORD KARREN
-----------------------------------
GAYLORD KARREN, President and CEO
1327 N. State Street
Orem, Utah 84057
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
GREENWICH, AG
By: /s/ DANIEL S. DORNIER
-----------------------------------
DANIEL S. DORNIER,
Chief Executive Officer
Neuer Wall 32
20354 Hamburg, Germany
Telephone: 011-49-40-37-50-23-30
Telecopier: 011-49-40-37-50-23-32
REGISTRATION RIGHTS AGREEMENT Page 14 of 14
- -----------------------------
<PAGE>
LICENSE RIGHT OF FIRST REFUSAL AGREEMENT
This LICENSE RIGHT OF FIRST REFUSAL AGREEMENT (this
"Agreement") is entered into as of the 3rd day of June, 1999, by and between
Venturi Technologies, Inc., a Nevada corporation ("Venturi"), and Greenwich ,
A.G., a German company ("Greenwich"). Venturi and Greenwich are sometimes
collectively referred to as the "Parties."
RECITALS
WHEREAS, Venturi has developed and is utilizing in certain areas of the
United States a proprietary method of cleaning carpets known as the
VenturiCleanSM System;
WHEREAS, Concurrently with the execution of this Agreement, the Parties
have entered into a Securities Purchase Agreement pursuant to which Greenwich is
purchasing 1,600,000 shares of Venturi Common Stock for $2,000,000;
WHEREAS, as partial consideration for the purchase of Common Stock by
Greenwich, Venturi has agreed to grant to Greenwich a right of first refusal as
to any license or franchise rights relating to the VenturiCleanSM System in the
European countries of Germany, Austria, Switzerland, the Czech Republic,
Belgium, the Netherlands and Luxembourg (the "Selected European Nations");
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the Parties agree as follows:
1. RIGHT OF FIRST REFUSAL.
(a) If, during the term hereof, Venturi receives a bona
fide offer in writing (the "Offer") from any third party ("Third Party") to
acquire any license or franchise rights utilizing the VenturiCleanSM System
anywhere within the Selected European Nations (the "Rights"), and if Venturi
desires to accept the Offer, Venturi shall give prompt written notice ("Notice")
of the desire to accept the Offer to Greenwich together with a copy of the
Offer. The Notice shall constitute an irrevocable offer by Venturi to sell any
or all of the Rights to Greenwich at the price and on the terms and conditions
set forth in the Offer for a period of thirty (30) days.
(b) Greenwich shall have the right, but not the
obligation, within thirty (30) days after the date of the Notice, to acquire all
or part of the Rights by providing notice of that election to Venturi. Any such
acquisition of Rights by Greenwich shall be at a price and on terms and
conditions no less favorable to Venturi than those set forth in the Offer. If
all or any part of the Rights are not acquired by Greenwich, the portion of such
Rights not acquired may be sold or transferred to the Third Party at the price
and on the same terms and conditions as provided for in the Offer.
<PAGE>
(c) If the Rights are not purchased by the Third Party
within one hundred twenty (120) days from the date of receipt of the Offer by
Venturi, the Offer shall be deemed to have expired and the Rights must be
re-offered to Greenwich pursuant to the procedures in this Section 1 if Venturi
then wishes to accept the Offer.
(d) Any transfer or purported transfer of the Rights or
any interest therein shall be null and void unless the terms and conditions of
this Agreement are strictly observed and followed, or such terms and conditions
are waived by Greenwich.
2. TERM AND TERMINATION. This Agreement will commence on the date
hereof and remain in effect for a period of ten (10) years. If either party
breaches a material provision of this Agreement, the other party may terminate
this Agreement upon thirty (30) days notice, unless the breach is cured within
the thirty (30) day notice period.
3. REPRESENTATIONS AND WARRANTIES. Venturi represents and
warrants to Greenwich as follows with respect to the Rights:
(a) LEGAL AUTHORITY. Venturi is a corporation organized and in
good standing under the laws of the State of Nevada, and has full authority to
offer or sell the Rights and to enter into this Agreement, and Venturi has not
made, and will not make, any commitments to others inconsistent with or in
derogation of this Agreement.
(b) AUTHORIZATION AND APPROVAL OF AGREEMENT. All actions required
to be taken by Venturi relating to the signing of this Agreement have been taken
prior to the date hereof.
(c) EXECUTION AND PERFORMANCE OF AGREEMENT. The performance of
this Agreement by Venturi will not result in a default of any Agreement to which
Venturi is a party.
(d) LITIGATION. There is no claim, order, investigation or other
proceeding, against Venturi relating to the transactions contemplated by this
Agreement and Venturi does not know or have any reason to be aware of any basis
for the same.
3. NOTICES. Any and all notices or other communications required
or permitted to be given under any of the provisions of this Agreement shall be
in writing and shall be deemed to have been duly given when personally delivered
or mailed by first class registered mail, return receipt requested, addressed to
the parties as follows:
If to Venturi: Venturi Technologies, Inc.
1327 North State
Orem, Utah 84057
Attention: Gaylord Karren, CEO
Telephone: (801) 235-9552
Telecopier: (801) 235-1731
<PAGE>
with a copy to: Randy K. Johnson, Esq.
Mackey, Price & Williams
170 S. Main Street
Suite 900
Salt Lake City, Utah 84101-1655
Telephone: (801) 575-5000
Telecopier: (801) 575-5006
If to Greenwich: Greenwich, AG
Neuer Wall 32
20354 Hamburg, Germany
Attention: Dr. Rainer Bischoff
Telephone: 011-49-40-37-50-23-30
Telecopier: 011-49-40-37-50-23-32
with a copy to: I. Bobby Majumder, Esq.
Gardere & Wynne L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Telephone: (214) 999-3000
Telecopier: (214) 999-4667
4. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. 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.
(b) NO WAIVER. 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.
(c) SUCCESSORS AND ASSIGNS. 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.
(d) PARAGRAPH HEADINGS. 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.
(e) FURTHER ASSURANCES. 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.
<PAGE>
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
(g) GOVERNING LAW. 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.
(h) INTERPRETATION. 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.
VENTURI:
VENTURI TECHNOLOGIES, INC.
By: /s/ GAYLORD KARREN
-------------------------------------
Its: CEO
------------------------------------
GREENWICH:
GREENWICH, A.G.
By: /s/ DANIEL DORNIER
-------------------------------------
DANIEL DORNIER,
Chief Executive Officer
<PAGE>
LOCK-UP AGREEMENT
June 3, 1999
Greenwich, AG
Neuer Wall 32
20354 Hamburg, Germany
Re: Venturi Technologies, Inc.
Gentlemen:
I am a beneficial owner of securities of Venturi Technologies, Inc.,
a Nevada corporation (the "Company"). I understand that you propose to
purchase certain securities of the Company. I acknowledge that such action by
you will be of material benefit to the Company and the undersigned as a
beneficial owner of the Company's securities.
In consideration of the foregoing, and in order to induce you to act
as set forth above, I confirm my agreement that I will not, without your
prior written approval, offer for sale, sell, pledge, hypothecate or
otherwise dispose of, directly or indirectly, any of the shares of the
Company's common stock which I may own legally or beneficially as set forth
on EXHIBIT "A" attached hereto and made a part hereof ("Shares"), in any
manner whatsoever whether pursuant to SEC Rule 144 or otherwise, prior to
December 3, 1999. Thereafter, the Shares shall be released from the
provisions of this Lock-Up Agreement at a rate of two percent (2%) per month
until all the Shares have been released or June 3, 2003, whichever is
earlier. Provided, however, the Shares in their entirety shall be released
from the provisions of this Lock-Up Agreement if one of the following events
occur:
(a) the Company's net income (all as audited and determined by the
Company's independent public accountants)("Net Income") amounts to at
least Twenty Four Million Three Hundred Five Thousand Five Hundred
Ninety Nine Dollars ($24,305,599.00) during the fiscal year ending on
December 31, 2000 or Forty Million Seven Hundred Forty Thousand Seven
Hundred Ninety Five Dollars ($40,740,795.00) during the fiscal year
ending on December 31, 2001; or
(b) the Net Income amounts to at least Fifty Eight Million Two
Hundred Eighty Six Thousand Nine Hundred Sixty Eight Dollars
($58,286,968.00) during the fiscal year ending on December 31, 2002; or
(c) commencing on the Closing and ending eighteen (18) months
after the Closing, the average closing bid price of the Company's
common stock shall average in excess of Ten Dollars ($10.00) per share
(subject to adjustment in the event of any reverse stock splits or
other similar events) for ninety (90) consecutive business days.
<PAGE>
The Net Income shall be calculated exclusive of any extraordinary
earnings including, but not limited to, any charge to income resulting from the
release of the escrowed shares. If any of the performance milestones detailed
above are achieved by the Company, then all restrictions contained in this
letter shall immediately become null and void. In any event, the restrictions
contained in this letter become null and void effective June 3, 2003, and all
shares held pursuant to this Lock-Up Agreement shall be released.
Notwithstanding anything contained herein to the contrary, I may place
up to ten percent (10%) of the Shares held pursuant to this Lock-Up Agreement in
a margin account or pledge such amount of Shares as collateral for a loan with a
commercial bank.
I further understand that the Company will take such steps as may be
necessary to enforce the foregoing provisions and restrict the sale or transfer
of the Shares as provided herein including, but not limited to, notification to
the Company's transfer agent regarding any such restrictions and having the
transfer agent place a restrictive legend on the physical certificates
representing the Shares reflecting the existence of the Lock-Up Agreement and
its restrictions on transfer; and I hereby agree to and authorize any such
actions and acknowledge that the Company and you are relying upon this agreement
in taking any such actions.
Very truly yours,
/s/ GAYLORD KARREN
------------------------------
(Shareholder)
<PAGE>
EXHIBIT "A"
Shares Owned
1,225,515 shares of $0.001 par value common stock
<PAGE>
LOCK-UP AGREEMENT
June 3, 1999
Greenwich, AG
Neuer Wall 32
20354 Hamburg, Germany
Re: Venturi Technologies, Inc.
Gentlemen:
I am a beneficial owner of securities of Venturi Technologies, Inc.,
a Nevada corporation (the "Company"). I understand that you propose to
purchase certain securities of the Company. I acknowledge that such action by
you will be of material benefit to the Company and the undersigned as a
beneficial owner of the Company's securities.
In consideration of the foregoing, and in order to induce you to act
as set forth above, I confirm my agreement that I will not, without your
prior written approval, offer for sale, sell, pledge, hypothecate or
otherwise dispose of, directly or indirectly, any of the shares of the
Company's common stock which I may own legally or beneficially as set forth
on EXHIBIT "A" attached hereto and made a part hereof ("Shares"), in any
manner whatsoever whether pursuant to SEC Rule 144 or otherwise, prior to
December 3, 1999. Thereafter, the Shares shall be released from the
provisions of this Lock-Up Agreement at a rate of two percent (2%) per month
until all the Shares have been released or June 3, 2003, whichever is
earlier. Provided, however, the Shares in their entirety shall be released
from the provisions of this Lock-Up Agreement if one of the following events
occur:
(a) the Company's net income (all as audited and determined by the
Company's independent public accountants)("Net Income") amounts to at
least Twenty Four Million Three Hundred Five Thousand Five Hundred
Ninety Nine Dollars ($24,305,599.00) during the fiscal year ending on
December 31, 2000 or Forty Million Seven Hundred Forty Thousand Seven
Hundred Ninety Five Dollars ($40,740,795.00) during the fiscal year
ending on December 31, 2001; or
(b) the Net Income amounts to at least Fifty Eight Million Two
Hundred Eighty Six Thousand Nine Hundred Sixty Eight Dollars
($58,286,968.00) during the fiscal year ending on December 31, 2002; or
(c) commencing on the Closing and ending eighteen (18) months
after the Closing, the average closing bid price of the Company's
common stock shall average in excess of Ten Dollars ($10.00) per share
(subject to adjustment in the event of any reverse stock splits or
other similar events) for ninety (90) consecutive business days.
<PAGE>
The Net Income shall be calculated exclusive of any extraordinary
earnings including, but not limited to, any charge to income resulting from the
release of the escrowed shares. If any of the performance milestones detailed
above are achieved by the Company, then all restrictions contained in this
letter shall immediately become null and void. In any event, the restrictions
contained in this letter become null and void effective June 3, 2003, and all
shares held pursuant to this Lock-Up Agreement shall be released.
Notwithstanding anything contained herein to the contrary, I may place
up to ten percent (10%) of the Shares held pursuant to this Lock-Up Agreement in
a margin account or pledge such amount of Shares as collateral for a loan with a
commercial bank.
I further understand that the Company will take such steps as may be
necessary to enforce the foregoing provisions and restrict the sale or transfer
of the Shares as provided herein including, but not limited to, notification to
the Company's transfer agent regarding any such restrictions and having the
transfer agent place a restrictive legend on the physical certificates
representing the Shares reflecting the existence of the Lock-Up Agreement and
its restrictions on transfer; and I hereby agree to and authorize any such
actions and acknowledge that the Company and you are relying upon this agreement
in taking any such actions.
Very truly yours,
/s/ JOHN M. HOPKINS
------------------------------
John M. Hopkins
<PAGE>
EXHIBIT "A"
Shares Owned
1,225,515 shares of $0.001 par value common stock
<PAGE>
Greenwich AG
Neuer Wall 32
20354 Hamburg, Germany
LOCK-UP AGREEMENT
June 4, 1999
Venturi Technologies, Inc.
1327 North State Street
Orem, Utah 84057
Re: Greenwich, A.G. Lock-up
Gentlemen:
Concurrently with the execution of this Lock-Up Agreement,
Greenwich, A.G. is acquiring from Venturi Technologies, Inc., a Nevada
corporation (the "Company") 1,600,000 shares of $0.001 par value Common Stock
of the Company (the "Shares"). In connection with the acquisition of the
Shares, Greenwich has agreed to certain transfer restrictions as set forth
herein. Greenwich acknowledges that such action will be of material benefit
to the Company and the undersigned as a beneficial owner of the Company's
securities.
In consideration of the foregoing, Greenwich confirms its agreement
that it will not, without your prior written approval, offer for sale, sell,
pledge, hypothecate or otherwise dispose of, directly or indirectly, any of
the shares of the Company's common stock which it may own legally or
beneficially as set forth on EXHIBIT "A" attached hereto and made a part
hereof ("Shares"), in any manner whatsoever whether pursuant to SEC Rule 144
or otherwise, prior to the date that is six months after the Closing.
Thereafter, the Shares shall be released from the provisions of this Lock-Up
Agreement at a rate of Fifty Two Thousand Six Hundred Thirty Two (52,632)
shares per month, provided, however, that all the Shares subject to this
Lock-Up shall be immediately released from this Lock-Up on the one year
anniversary of the Closing.
I further understand that the Company will take such steps as may be
necessary to enforce the foregoing provisions and restrict the sale or
transfer of the Shares as provided herein including, but not limited to,
notification to the Company's transfer agent regarding any such restrictions
and having the transfer agent place a restrictive legend on the physical
certificates representing the Shares reflecting the existence of the Lock-Up
Agreement and its restrictions on transfer; and I hereby agree to and
authorize any such actions and acknowledge that the Company and you are
relying upon this agreement in taking any such actions.
Very truly yours,
GREENWICH, A.G.
By: /s/ DANIEL DORNIER
---------------------------------------
DANIEL DORNIER, Chief Executive Officer
<PAGE>
EXHIBIT "A"
1,600,000 Shares of $0.001 Par Value Common Stock
<PAGE>
EXHIBIT "A"
VENTURI TECHNOLOGIES, INC.
(A NEVADA CORPORATION)
-----------------------
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
-----------------------
Effective June 3, 1999
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT (1) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER
THE SECURITIES ACT, OR (3) PURSUANT TO AN EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR OTHER JURISDICTION. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANING GIVEN THEM BY
REGULATION S UNDER THE SECURITIES ACT.
THIS CERTIFIES THAT, for value received, GREENWICH, AG or registered
assigns ("Holder"), is entitled to purchase, subject to the conditions set
forth below, at any time or from time to time during the Exercise Period (as
defined in subsection 1.2, below), Twenty Two Thousand Eight Hundred Six
(22,806) shares ("Shares") of fully paid and non-assessable Common Stock,
$0.001 par value ("Common Stock"), of Venturi Technologies, Inc., a Nevada
corporation (the "Company"), at the per share purchase price (the "Warrant
Price") set forth in subsection 1.1, subject to the further provisions of
this Warrant. The term "Warrants" as used herein shall mean this Warrant and
all instruments issued by the Company which are substantially identical to
this Warrant (except for the name of the holder and the number of securities
purchasable by the holder).
1. EXERCISE OF WARRANT
The terms and conditions upon which this Warrant may be exercised,
and the Common Stock covered hereby may be purchased, are as follows:
- 1 -
<PAGE>
1.1 WARRANT PRICE. The Warrant Price shall be equal to $30.00 per
share, subject to adjustment as provided in Section 4, below.
1.2 METHOD OF EXERCISE.
(a) Voluntary Exercise of Warrant by Holder. The Holder may, at
any time beginning June 3, 1999, and prior to January 31, 2001, or such later
date as the Company may in its sole discretion determine (the "Exercise
Period"), exercise in whole or in part the purchase rights evidenced by this
Warrant. Such exercise shall be effected by:
(i) the surrender of the Warrant, together with a duly
executed copy of the form of subscription attached hereto, to the
Secretary of the Company at its principal offices;
(ii) the payment to the Company, by cash, check payable to
its order or wire transfer, of an amount equal to the aggregate Warrant
Price for the number of Shares for which the purchase rights hereunder
are being exercised; and
(iii) the delivery to the Company, if necessary, to assure
compliance with federal and state securities laws, of an instrument
executed by the holder certifying that the Shares are being acquired
for the sole account of the holder and not with a view to any resale or
distribution.
(b) Forced Exercise by Company. This Warrant may be callable by
the Company upon the following conditions:
(i) If, using generally accepted accounting principles,
the Company achieves net income for the fiscal year ending December 31,
1999 in an amount equal to, or greater than, the Net Income reflected
for 1999 on the Pro Forma Income Statements, attached hereto as EXHIBIT
"A", multiplied by a fraction, the numerator of which is the number of
days in the 1999 fiscal year after the Closing and the denominator of
which is 365, then the Company will be able to call 1/3 of the Warrant
and the Holder shall be obligated to purchase 7,602 shares of Common
Stock for which the Holder shall pay to the Company as paid in capital
USD $228,070.16;
(ii) If, using generally accepted accounting principles,
the Company achieves net income for the fiscal year ending December 31,
2000 in an amount equal to, or greater than the Net Income reflected
for 2000 on the attached Pro Forma Income Statements, then the Company
will be able to call 1/3 of the Warrant and the Holder shall be
obligated to purchase 7,602 shares of Common Stock for which the Holder
shall pay to the Company as paid in capital an additional USD
$228,070.16;
(iii) If, using generally accepted accounting principles,
the Company achieves net income for the fiscal year ending December 31,
2001 in an amount equal to, or greater than the Net Income reflected
for 2001 on the attached Pro Forma Income Statements, then the Company
will be able to call the remaining 1/3 of the Warrant and the Holder
shall be obligated to purchase 7,602 shares of Common Stock for which
the Holder shall pay to the Company as paid in capital an additional
USD $228,070.16.
The manner of exercise pursuant to this Section 1.2(b) shall be effected
according to the procedures set forth in Section 1.2(a)(i), (ii) and (iii)
above.
EXHIBIT "A" TO SECURITIES PURCHASE AGREEMENT
- --------------------------------------------
- 2 -
<PAGE>
1.3 SATISFACTION WITH REQUIREMENTS OF SECURITIES ACT OF 1933.
Notwithstanding the provisions of subsection 1.2(a)(iii) and Section 7, each
and every exercise of this Warrant is contingent upon the Company's
satisfaction that the issuance of Common Stock upon the exercise is exempt
from the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and all applicable state securities laws. The holder of
this Warrant agrees to execute any and all documents deemed necessary by the
Company to effect the exercise of this Warrant. Holder represents and
warrants that: (a) it is not a citizen or resident of the United States of
America, (b) it is not an entity organized under any laws of any state of the
United States of America, and (c) it does not have offices in the United
States of America.
1.4 ISSUANCE OF SHARES AND NEW WARRANT. In the event the
purchase rights evidenced by this Warrant are exercised in whole or in part,
one or more certificates for the purchased Shares shall be issued as soon as
practicable thereafter to the person exercising such rights. Such holder
shall also be issued at such time a new Warrant representing the number of
Shares (if any) for which the purchase rights under this Warrant remain
unexercised and continuing in force and effect.
2. TRANSFERS
2.1 TRANSFERS. Subject to Section 7 hereof, this Warrant and
all rights hereunder are transferable in whole or in part by the holder. The
transfer shall be recorded on the books of the Company upon the surrender of
this Warrant, properly endorsed, to the Secretary of the Company at its
principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer. In the event of a
partial transfer, the Company shall issue to the several holders one or more
appropriate new Warrants.
2.2 REGISTERED HOLDER. Each holder agrees that until such time
as any transfer pursuant to subsection 2.1 is recorded on the books of the
Company, the Company may treat the registered holder of this Warrant as the
absolute owner; provided that nothing herein affects any requirement that
transfer of any Warrant or share of Common Stock issued or issuable upon the
exercise thereof be subject to compliance with the Securities Act and all
applicable state securities laws.
2.3 FORM OF NEW WARRANTS. All Warrants issued in connection
with transfers of this Warrant shall bear the same date as this Warrant and
shall be substantially identical in form and provision to this Warrant except
for the number of Shares purchasable thereunder.
3. FRACTIONAL SHARES
Notwithstanding that the number of Shares purchasable upon the
exercise of this Warrant may have been adjusted pursuant to the terms hereof,
the Company shall nonetheless not be required to issue fractions of Shares
upon exercise of this Warrant or to distribute certificates that evidence
fractional shares nor shall the Company be required to make any cash payments
in lieu thereof upon exercise of this Warrant. Holder hereby waives any right
to receive fractional Shares.
4. ANTIDILUTION PROVISIONS
4.1 STOCK SPLITS AND COMBINATIONS. If the Company shall at any
time subdivide or combine its outstanding shares of Common Stock, this Warrant
shall, after that subdivision or combination, evidence the right to purchase the
number of shares of Common Stock that would have been issuable as a result of
that change
EXHIBIT "A" TO SECURITIES PURCHASE AGREEMENT
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<PAGE>
with respect to the Shares of Common Stock that were purchasable under this
Warrant immediately before that subdivision or combination. If the Company
shall at any time subdivide the outstanding shares of Common Stock, the
Warrant Price then in effect immediately before that subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock, the Warrant Price then in effect
immediately before that combination shall be proportionately increased. Any
adjustment under this section shall become effective at the close of business
on the date the subdivision or combination becomes effective.
4.2 RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than a subdivision
or combination of shares provided for above), the holder of this Warrant shall,
on its exercise, be entitled to purchase for the same aggregate consideration,
in lieu of the Common Stock that the holder would have become entitled to
purchase but for such change, a number of shares of such other class or classes
of stock equivalent to the number of shares of Common Stock that would have been
subject to purchase by the holder on exercise of this Warrant immediately before
that change.
4.3 REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALE OF ASSETS. If
at any time there shall be a capital reorganization of the Company's Common
Stock (other than a stock split, combination, reclassification, exchange, or
subdivision of shares provided for elsewhere above) or merger or consolidation
of the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the holder of this Warrant shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
in this Warrant and upon payment of the Warrant Price then in effect, the number
of shares of Common Stock or other securities or property of the Company, or of
the successor corporation resulting from such merger or consolidation, to which
a holder of the Common Stock deliverable upon exercise of this Warrant would
have been entitled in such capital reorganization, merger or consolidation or
sale if this Warrant had been exercised immediately before that capital
reorganization, merger or consolidation or sale. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the holder of this Warrant after the
reorganization, merger, consolidation, or sale to the end that the provisions of
this Warrant (including adjustment of the Warrant Price then in effect and
number of Shares purchasable upon exercise of this Warrant) shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant. The
Company shall, within thirty (30) days after making such adjustment, give
written notice (by first class mail, postage prepaid) to the registered holder
of this Warrant at the address of that holder shown on the Company's books. That
notice shall set forth, in reasonable detail, the event requiring the adjustment
and the method by which the adjustment was calculated and specify the Warrant
Price then in effect after the adjustment and the increased or decreased number
of Shares purchasable upon exercise of this Warrant. When appropriate, that
notice may be given in advance and be included as part of the notice required
under other provisions of this Warrant.
4.4 COMMON STOCK DIVIDENDS; DISTRIBUTIONS. In the event the
Company should at any time prior to the expiration of this Warrant fix a record
date for the determination of the holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of
EXHIBIT "A" TO SECURITIES PURCHASE AGREEMENT
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<PAGE>
Common Stock (hereinafter referred to as the "Common Stock Equivalents")
without payment of any consideration by such holder for the additional shares
of Common Stock or Common Stock Equivalents (including the additional shares
of Common Stock issuable upon conversion or exercise thereof), then, as of
such record date (or the date of such distribution, split or subdivision if
no record date is fixed), the Warrant Price shall be appropriately decreased
and the number of shares of Common Stock issuable upon exercise of the
Warrant shall be appropriately increased in proportion to such increase of
outstanding shares.
4.5 ADJUSTMENTS OF OTHER DISTRIBUTIONS. In the event the Company
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4.4, then, in each
such case for the purpose of this subsection 4.5, upon exercise of this Warrant
the holder hereof shall be entitled to a proportionate share of any such
distribution as though such holder was the holder of the number of shares of
Common Stock of the Company into which this Warrant may be exercised as of the
record date fixed for the determination of the holders of Common Stock of the
Company entitled to receive such distribution.
4.6 CERTIFICATE AS TO ADJUSTMENTS. In the case of each adjustment
or readjustment of the Warrant Price pursuant to this Section 4, the Company
will promptly compute such adjustment or readjustment in accordance with the
terms hereof and cause a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, to be delivered to the holder of this Warrant. The
Company will, upon the written request at any time of the holder of this
Warrant, furnish or cause to be furnished to such holder a certificate setting
forth:
(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Common Stock issuable upon exercise of
the Warrant and the amount, if any, of other property at the
time receivable upon the exercise of the Warrant.
4.7 RESERVATION OF STOCK ISSUABLE UPON EXERCISE. The Company shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the exercise of this
Warrant such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, in addition to such other remedies as shall
be available to the holder of this Warrant, the Company will use its best
efforts to take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
5. RIGHTS PRIOR TO EXERCISE OF WARRANT
This Warrant does not entitle the holder to any of the rights of a
stockholder of the Company, including without limitation, the right to receive
dividends or other distributions, to exercise any preemptive rights, to vote, or
to consent or to receive notice as a stockholder of the Company. If, however, at
any time prior to the expiration of this Warrant and prior to its exercise, any
of the following events shall occur:
(a) the Company shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution (other than
a regular cash dividend) to the holders of its shares of Common Stock; or
EXHIBIT "A" TO SECURITIES PURCHASE AGREEMENT
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<PAGE>
(b) the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe for or
purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, sale, transfer or lease of all
or substantially all of its property, assets, and business as an entirety) shall
be proposed and action by the Company with respect thereto has been approved by
the Company's Board of Directors,
Then in any one or more of said events the Company shall give notice in writing
of such event to the holder at his last address as it shall appear on the
Company's records at least twenty (20) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividends, distribution, or subscription rights,
or for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be. Failure to
publish, mail or receive such notice or any defect therein or in the publication
or mailing thereof shall not affect the validity of any action taken in
connection with such dividend, distribution or subscription rights, or such
proposed dissolution, liquidation or winding up. Each person in whose name any
certificate for shares of Common Stock is to be issued shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
this instrument was surrendered and payment of the Warrant Price was made,
irrespective of the date of delivery of such stock certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares of Common Stock at the close of business on the next succeeding
date on which the stock transfer books are open.
6. SUCCESSORS AND ASSIGNS
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and the holder thereof and their respective
successors and permitted assigns.
7. RESTRICTED SECURITIES
In order to enable the Company to comply with the Securities Act and
applicable state laws, the Company may require the holder as a condition of the
transfer or exercise of this Warrant, to give written assurance satisfactory to
the Company that the Warrant, or in the case of an exercise hereof the shares
subject to this Warrant, are being acquired for his own account, for investment
only, with no view to the distribution of the same, and that any disposition of
all or any portion of this Warrant or the Shares issuable upon the due exercise
of this Warrant shall not be made, unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) (i) The holder has notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) the holder has
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such securities
under the Securities Act and applicable state law.
The holder acknowledges that this Warrant is, and each of the shares of
Common Stock issuable upon the due exercise hereof will be, a restricted
security, that he understands the provisions of Rule 144 of the
EXHIBIT "A" TO SECURITIES PURCHASE AGREEMENT
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<PAGE>
Securities and Exchange Commission, and that the certificate or certificates
evidencing such shares of Common Stock will bear a legend substantially
similar to the following:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any state. They may not be sold, transferred or otherwise
disposed of in the absence of an effective registration statement
covering these securities under the said Act or laws, or an opinion of
counsel satisfactory to the Company and its counsel that registration
is not required thereunder."
8. LOSS OR MUTILATION
Upon receipt by the Company of satisfactory evidence of the ownership
of and the loss, theft, destruction, or mutilation of any Warrant, and (i) in
the case of loss, theft, or destruction, upon receipt by the Company of
indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt of
such Warrant and upon surrender and cancellation of such Warrant, the Company
shall execute and deliver in lieu thereof a new Warrant representing the right
to purchase an equal number of shares of Common Stock.
9. NOTICES
All notices, requests, demands and other communications under this
Warrant shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the date of mailing if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed as follows: if to the holder, at his address as shown in the Company
records; and if to the Company, at its principal office. Any party may change
its address for purposes of this subsection by giving the other party written
notice of the new address in the manner set forth above.
10. GOVERNING LAW
This Warrant and any dispute, disagreement or issue of construction or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed or
interpreted according to the laws of the State of Nevada without regard to
conflicts of law.
DATED AS OF JUNE ________, 1999.
VENTURI TECHNOLOGIES, INC.
By:
--------------------------------
GAYLORD KARREN, Chairman and CEO
EXHIBIT "A" TO SECURITIES PURCHASE AGREEMENT
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<PAGE>
SUBSCRIPTION
- ---------------------------
- ---------------------------
- ---------------------------
Gentlemen:
The undersigned, _____________________, hereby elects to purchase, pursuant
to the provisions to the foregoing Warrant held by the undersigned,
________________ shares of the Common Stock, $0.001 par value ("Common
Stock"), of ________________________________.
Payment of the purchase price per Share required under such Warrant
accompanies this subscription.
The undersigned hereby represents and warrants that absent an effective
registration statement covering the Warrants, the undersigned is acquiring
such stock for the account of the undersigned and not for resale or with a
view to distribution of such Common Stock or any part hereof; that the
undersigned is fully aware of the transfer restrictions affecting restricted
securities under the pertinent securities laws and the undersigned
understands that the shares purchased hereby are restricted securities and
that the certificate or certificates evidencing the same will bear a legend
to that effect.
DATED: ____________________, 199__.
Signature:
------------------------
Address:
------------------------
------------------------
EXHIBIT "A" TO SECURITIES PURCHASE AGREEMENT
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- 8 -
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,135,774
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<RECEIVABLES> 1,288,594
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0
<COMMON> 10,366
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<TOTAL-LIABILITY-AND-EQUITY> 12,711,790
<SALES> 2,220,199
<TOTAL-REVENUES> 2,220,199
<CGS> 942,320
<TOTAL-COSTS> 2,232,133
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<INTEREST-EXPENSE> 109,198
<INCOME-PRETAX> (1,063,452)
<INCOME-TAX> (372,208)
<INCOME-CONTINUING> (691,244)
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