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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999, or
[ ] 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
Securities registered under Section 12(b) of the Exchange Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
NONE NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
COMMON STOCK, $0.001 PAR VALUE
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Registrant's revenues for its most recent fiscal year were $9,956,218
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant as of March 31, 2000 was approximately
$25,977,570 calculated using a per share price of $2.625, the closing price
on March 31, 2000 of the Registrant's common stock on the NASD OTC Bulletin
Board.
As of March 31, 2000, Registrant had outstanding 13,531,247 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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VENTURI TECHNOLOGIES, INC.
INDEX-FORM 10-KSB
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PART I
PAGE
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Item 1. Description of Business................................................................................1
Item 2. Description of Properties..............................................................................7
Item 3. Legal Proceedings......................................................................................8
Item 4. Submission of Matters to a Vote of Security Holders....................................................8
PART II
Item 5. Market for the Common Equity and Related Stockholder Matters...........................................8
Item 6. Management's Discussion and Analysis or Plan of Operations............................................10
Item 7. Financial Statements..................................................................................12
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act................................................................13
Item 10. Executive Compensation................................................................................15
Item 11. Security Ownership of Certain Beneficial Owners and Management .......................................19
Item 12. Certain Relationships and Related Transactions .......................................................20
PART IV
Item 13. Exhibits and Reports on Form 8-K......................................................................22
Signatures ......................................................................................................27
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Venturi Technologies, Inc. ("Venturi" or the "Company") is a Nevada
corporation, incorporated on January 30, 1997, whose common stock is traded
on the OTC Bulletin Board under the symbol VTIX. Venturi is the successor to
a Texas corporation of the same name that was incorporated in August 1994.
Venturi provides carpet cleaning and fire and flood restoration services
using proprietary technology known as VenturiClean-SM-. Venturi's strategy is
to consolidate the highly fragmented professional carpet cleaning services
industry by acquiring independent carpet cleaning companies nationwide.
Venturi presently operates in Utah, Texas, California, Nevada, Arizona,
Florida, Kentucky, Oregon, Washington, Georgia, Colorado, and Vancouver,
British Columbia. Venturi plans to expand its operations to other states
through acquisitions, until VenturiClean-SM- is in use throughout the United
States. The Company has corporate offices at 763 North 530 East, Orem, Utah
84097; phone: (801) 235-9552; fax: (801) 235-1731.
Venturi Technologies, Inc. provides carpet cleaning and related services
using the Company's patented VenturiClean-SM- system. The Company believes
its new process for cleaning carpets is the first major advancement in carpet
cleaning technology in recent history.
Carpet cleaning has changed little in past decades, and barriers to entry
have remained low. Consequently, there are approximately 50,000
carpet-cleaning companies (independent and franchises) in the United States
generating an estimated $10 billion in annual revenues. The largest of these
companies hold only a 2% market share. Venturi aims to change this by using
its patented technology, quality customer service, aggressive marketing, and
public structure in a bid to become the major player in the carpet cleaning
industry.
Only the VenturiClean-SM- System uses proprietary non-toxic, non-detergent,
non-surfactant, high temperature and molecularly-aligned water that creates a
"super-wet" cleaning fluid. The patented VenturiClean-SM- system recovers
most of the water applied to carpets, reducing drying time, while also
killing and removing almost all foreign contaminants and pathogens, all with
zero toxicity. No other carpet cleaning system uses the same water treatment,
high temperatures, retrieval, and fluid control system as Venturi.
The Company is executing a two-part growth strategy: (1) Gain new markets
through strategic acquisitions, and (2) Expand market share in existing
markets through Venturi's proprietary technology and superior service.
Venturi has experienced substantial growth in revenue in recent years. From
1994 to 1999, Venturi's total revenues grew from $230,300 (in pre-pooling
revenues) to $9,956,218. Venturi intends to capitalize on its proprietary
VenturiClean-TM- system and continue to consolidate this fragmented industry,
and to develop repeat clients in all segments of the industry.
Beaulieu Group, LLC ("Beaulieu"), a privately owned carpet manufacturer, is a
major shareholder and strategic partner with Venturi. Beaulieu is one of the
top three carpet manufacturers in the world with annual revenues exceeding
$1.5 billion. Beaulieu sells through a national network of approximately
30,000 dealers. Venturi and Beaulieu recently formed a strategic partnership
and expect to benefit from cross selling their products and services.
HISTORY AND DEVELOPMENT OF VENTURI
Venturi was incorporated in Nevada on January 30, 1997, under the name HiTek
Carpet Care, Inc. Venturi was formed for the purpose of acquiring carpet
cleaning and flood and fire restoration service companies. The formation was
effected with the issuance of 1,500,000 shares of Common Stock for $150,000.
On June 30, 1997, HiTek issued 2,807,714 shares of its common stock to the
shareholders of Venturi Technologies, Inc., a Texas Corporation formed on
August 17, 1994 (the "Texas Corporation"). The Texas Corporation became a
wholly-owned subsidiary of Venturi
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when the stockholders of the Texas Corporation exchanged all of the issued
and outstanding shares of the Texas Corporation for shares of Common Stock
and Preferred Stock of Venturi. The share exchange was consummated pursuant
to a Stock for Stock Agreement dated as of June 30, 1997, and was treated as
a tax-free reorganization. In connection with the reorganization, HiTek
Carpet Care, Inc. changed its name to Venturi Technology Enterprises, Inc.,
and shortly thereafter changed its name to Venturi Technologies, Inc. As a
result of the stock for stock exchange, the former Texas Corporation
stockholders attained ownership and voting control of HiTek. Venturi was
approved for trading on April 10, 1997 on the NASD OTC Bulletin Board, under
the symbol "VTIX".
ACQUISITIONS FROM 1995 THROUGH 1998
From 1995 through 1998, the Company acquired the assets of the following 13
separate carpet cleaning and restoration businesses, primarily in exchange
for common stock of the Company.
In 1995, the Texas Corporation acquired substantially all of the net assets
of Dependable Janitorial, Inc. and Dependable Carpet Cleaning, an Orem,
Utah-based company. The Texas Corporation issued 137,499 shares of common
stock in the exchange. In March 1996, the Texas Corporation exchanged 100,000
shares of its common stock for substantially all of the net assets of T-Co
Carpet Cleaning and T-Co Heating Systems, and Preferred Carpet Care of
Dallas. T-Co had operations in Irving, Texas, providing carpet cleaning
services and manufacturing heating units for carpet cleaning equipment.
Venturi has integrated the heaters manufactured by T-Co Heating Systems, and
has developed certain additional proprietary equipment used in its
proprietary VenturiClean-TM- cleaning method. Venturi formed a separate
wholly-owned subsidiary named "T-Co Manufacturing, Inc." as a Utah
corporation in 1997. This corporation has never functioned as a separate
entity, and has no employees or assets. Also in March 1996 the Texas
Corporation acquired all of the net assets of Preferred Carpet Care in
Lubbock, Texas for 10,000 shares of common stock.
In October 1996, the Texas Corporation exchanged 22,000 shares of its Common
Stock for substantially all of the net assets of Stone Flood & Fire
Restoration and ProTech Restoration, with carpet cleaning and restoration
operations in Provo, Utah.
In March 1998, Venturi acquired substantially all of the net assets of
Protech Carpet Cleaning and Flood Restoration, of Riverton, Utah, in exchange
for 4,000 shares of Common Stock. In April 1998, Venturi acquired
substantially all of the net assets of Complete Carpet Service, a Dallas,
Texas-based carpet cleaning enterprise, in exchange for 7,500 shares of
Common Stock. In July 1998, Venturi acquired substantially all of the net
assets of a sole proprietorship doing business in Lancaster, California under
the names "All Valley Carpet, All Valley Carpet & Upholstery Cleaning and All
Valley Restoration Service." These assets were acquired in exchange for 5,000
shares of Venturi's Common Stock.
In August of 1998, Venturi acquired substantially all of the assets of Dirt
Free Carpet and Upholstery Cleaning, Inc., a Texas Corporation, with
operations in Houston, Texas, in exchange for 52,632 shares of its common
stock. In October 1998, Venturi acquired substantially all of the net assets
of Top Gun, Inc., a northern California based carpet cleaning company, in
exchange for 8,000 shares of Common Stock. In October 1998, Venturi acquired
substantially all of the net assets of Disaster Plus Corp., a fire and flood
restoration business located in Orem, Utah in exchange for 4,000 shares of
Venturi Common Stock. Effective as of December 27, 1998, Venturi acquired
substantially all of the net assets of Flohr, Inc., a Utah corporation doing
business as Magic Touch Carpet and Furniture Cleaning in Midvale, Utah in
exchange for 13,000 shares of Common Stock.
ACQUISITIONS IN 1999
In September 1999, Venturi acquired all of the outstanding capital stock of
J.L.L.C., Inc., a Utah corporation doing business in Salt Lake City, Utah
under the name Leavitt Restoration Services, in exchange for 25,000 shares of
Common Stock; two promissory notes in the principal amount of $55,324; and
the assumption of approximately $105,000 in liabilities. The corporation then
changed its name to Venturi Flood & Fire Restoration, Inc., and is operated
as a wholly owned subsidiary of Venturi. Eventually, all of the flood and
fire restoration services provided by Venturi will be provided by Venturi
Flood & Fire Restoration, Inc.
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In October 1999, Venturi entered into a Restated Global Agreement for
Purchase and Sale ("Global MPI Agreement"), pursuant to which the Company
agreed to acquire all of the assets of six related partnerships and all of
the outstanding stock of four related corporations, collectively known as
"MPI," in separate closings between October 1999 and the first quarter of
2000. The MPI entities are all engaged in the professional carpet cleaning
services business in the states of Colorado, Florida, Arizona, Nevada,
Oregon, Georgia and Washington, and in the province of British Columbia,
Canada. The Global MPI Agreement called for a total consideration to be paid
by the Company for the MPI entities consisting of $1,650,000 cash; promissory
notes in the total principal amount of $3,200,000; an assumption of debt and
liabilities, all of which is to be paid off at closing; and a total of
800,000 shares of Venturi's common stock. Venturi subsequently agreed to also
acquire all of the outstanding stock of a related entity, All Fours
Distributing, Inc., for $100,000 cash, a $200,000 promissory note and 50,000
shares of Venturi's common stock, subject to an option to be granted to the
present shareholders of All Fours Distributing, Inc. to re-purchase up to 49%
of the stock for a nominal price if certain revenue milestones are met.
Pursuant to the Global MPI Agreement, in October 1999, the Company acquired
all of the assets of MPI of Nevada for $20,000 cash; a promissory note in the
principal amount of $40,000; 10,000 shares of Venturi's common stock; and the
assumption of approximately $95,000 in debts and liabilities, all of which
were paid at closing; and Venturi acquired all of the outstanding capital
stock of 593693 B.C. LTD., a British Columbia, Canada, corporation doing
business as Sunburst Carpet Services for $50,000 cash and the assumption of
approximately $20,000 in liabilities, all of which were paid in full at
closing.
Pursuant to the Global MPI Agreement, in November 1999, the Company acquired
all of the assets of MPI of Arizona, an Arizona general partnership, for
$80,000 cash; a promissory note in the principal amount of $160,000; 40,000
shares of the Company's common stock; and the assumption of approximately
$30,000 in debts and liabilities, all of which were paid in full at the
closing. Pursuant to the Global MPI Agreement, in December 1999, the Company
acquired all of the assets of MPI of Northern Florida, a Colorado general
partnership, for $17,000 cash; a promissory note in the principal amount of
$34,000; 8,500 shares of the Company's common stock; and the assumption of
certain debts and liabilities in the amount of approximately $53,000, all of
which were paid at or shortly after the closing.
In November 1999, the Company acquired all of the carpet cleaning assets of
two carpet cleaning businesses located in Louisville and Lexington, Kentucky
owned by Jon T. Freeberg and Bridget E. Freeberg, which businesses were known
as Kentuckiana's Best Cleaning Co. in Louisville and Kentucky's Best Cleaning
Co. in Lexington. The consideration for the Kentucky assets consisted of
$200,000 cash; a promissory note in the principal amount of $100,000; and
160,436 shares of Venturi's common stock.
ACQUISITIONS IN 2000
On March 31, 2000, the Company completed its acquisition of the MPI entities
by acquiring MPI carpet cleaning companies located in Florida, Washington,
Oregon, Georgia and Colorado. For financial and assimilation purposes, the
acquisition was effective as of February 1, 2000. This final closing was
pursuant to the Global MPI Agreement, and consisted of the acquisition of
three related operating general partnerships (MPI of So. Florida, MPI of
Washington and MPI of Georgia) and three related operating corporations (MPI
of Florida, Inc., MPI of Oregon, Inc., and Martin & Peterman, Inc., dba MPI
of Colorado). As part of the acquisition of MPI entities, the Company also
acquired from Mitchell J. Martin and Lloyd E. Peterman all of the outstanding
stock of All Fours Distributing, Inc., a Colorado corporation that owned a
51% general partnership interest in the MPI entities that were structured as
partnerships. All Fours Distributing, Inc. also owns and operates a carpet
sales and installation business which will be spun off into a separate entity
to be wholly owned by Venturi but which shall be subject to the right of
Messrs. Martin and Peterman to purchase a 49% interest in that entity for a
nominal consideration upon the occurrence of certain future events.
The MPI entities acquired by the Company on March 31, 2000, effective
February 1, 2000 and the consideration for those entities are as follows:
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ENTITY (1) CASH (2) VENTURI STOCK (3) THREE YEAR NOTE (4) DEBT PAID AT CLOSING (5)
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All Fours Distributing, Inc. $228,000 91,500 shares $306,000 0
MPI of So. Florida $24,500 12,250 shares $49,000 0
MPI of Washington $49,000 24,500 shares $98,000 0
MPI of Georgia $73,500 36,750 shares $147,000 0
MPI of Florida, Inc. $300,000 150,000 shares $600,000 0
MPI of Oregon, Inc. $43,000 21,500 shares $86,000 0
Martin & Peterman, Inc., dba MPI $840,000 482,500 shares $1,880,000 $386,933
of Colorado
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(1) MPI of So. Florida is a general partnership with carpet cleaning
operations in Miami, Florida. All Fours Distributing, Inc. is a 51%
partner and EIKOV Enterprises, Inc., a Florida corporation, is a 49%
partner of MPI of So. Florida. MPI of Washington is a general
partnership with carpet cleaning operations in Seattle, Washington. All
Fours Distributing, Inc. is a 51% partner and Delabarre Enterprises,
Inc., a Washington corporation, is a 49% partner of MPI of Washington.
MPI of Georgia is a general partnership with carpet cleaning operations
in Atlanta, Georgia. All Fours Distributing, Inc. is a 51% partner and
McNamara Enterprises, Inc., a Georgia corporation is a 49% partner of
MPI of Georgia. At the March 31, 2000 closing, Venturi acquired the 49%
partnership interests in the above partnerships from the minority
partners for the consideration listed in the table for each respective
partnership, and acquired all of the outstanding stock of All Fours
Distributing, Inc., the 51% partner for the consideration listed in the
table for All Fours Distributing, Inc. MPI of Florida, Inc., is a
corporation with operations in Tampa and Orlando, Florida, MPI of
Oregon, Inc. is a corporation with operations in Portland, Oregon, and
MPI of Colorado, Inc. is a corporation with operations in Denver and
Colorado Springs, Colorado. The Stock of these three corporations is
owned by Mitchell J. Martin (50%) and Lloyd E. Peterman (50%). At the
March 31, 2000 closing, Venturi acquired from Messrs. Martin and
Peterman all of the outstanding stock of those corporations. All Fours
Distributing, Inc. is a corporation whose stock is owned by Messrs.
Martin (50%) and Peterman (50%). At the March 31, 2000 closing, Venturi
acquired all of the outstanding stock of All Fours Distributing, Inc.
(2) At the March 31, 2000 closing, Venturi paid a total of $800,000 cash
which was to be used to pay some of the cash component of the various
purchase prices, and to pay off certain bank debt assumed by Venturi.
Venturi executed and delivered a promissory note due on April 25, 2000
for $1,348,836.63 covering the balance of the cash component of the
purchase price and the remaining debt to be paid by Venturi. With
respect to the partnerships, the cash portion of the purchase price as
shown in the table includes all cash paid to the 49%.
(3) With respect to the partnerships, the number of shares shown in the
table includes all shares issued to the 49% partners.
(4) The promissory notes accrue interest at the rate of nine percent (9%)
per annum, and provide for monthly payments of principal an interest
based on a fifteen (15) year amortization, with a balloon payment of
all principal and accrued interest due three (3) years from the date of
closing. The notes are unsecured.
(5) The debt paid at closing represents primarily bank loans and loans from
All Fours Distributing, Inc., a corporation owned by Messrs. Martin and
Peterman, the stock of which has also been acquired by Venturi. Most of
the debt paid at closing was secured by carpet cleaning trucks and
truck mounted carpet cleaning units.
As a result of its acquisitions, as of March 31, 2000, Venturi had a total of
24 operating bases, located in the states of Utah, Texas, California, Nevada,
Arizona, Florida, Kentucky, Oregon, Washington, Georgia, Colorado and in
British Columbia, Canada.
INDUSTRY OVERVIEW
As reported by industry sources, the annual domestic market for carpet
cleaning services was approximately $5 to $10 billion in 1997; and the market
for flood repair and restoration was estimated to be much larger.
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The industry can be divided into four segments: commercial cleaning,
apartment and multi-family residential cleaning, single-family residential
cleaning and restoration or disaster cleanup. The industry is highly
fragmented, although there are a small number of franchise competitors, such
as Service Master, ChemDry and DuraClean.
Current carpet cleaning technology has remained the same for the past 20
years. Despite the fact that trade publications have estimated that nearly
90% of carpet cleaning customers are dissatisfied with the results of their
carpet cleaning services, no improvements had been made in the basic
technology until Venturi developed the VenturiClean-SM- System. Two basic
carpet cleaning methods are used throughout the rest of the industry: the
steam extraction method and the spin bonnet method. Approximately 40% of
carpet cleaning uses the steam extraction method, which involves the
injection of hot water into the carpet, usually at a pressure of about 300
psi, and the use of a vacuum process to attempt to remove the water. Some
companies using the steam extraction method apply a soap or chemical prespray
followed by a rinse with clean water; others use water with chemical or soap
solutions during the cleaning phase without a rinse. This method is not as
effective as the VenturiClean-SM- System because the water used penetrates
the carpet backing and pad before the vacuum process can retrieve that water.
Only about 70% of the water applied to the carpet is ever retrieved; the rest
remains in the carpet fiber, backing and pad, requiring days to dry. Once the
water has evaporated, it leaves a residue of soils, chemicals and
surfactants, and often feels crusty. The residual surfactants act as magnets
for dirt particles, and the carpet becomes soiled soon after the cleaning.
The excessive wetting involved in this process can also cause delamination of
the carpet backing, weakening the carpet fibers.
The other basic carpet cleaning methods are CO2 foam and spin bonnet.
Although drier than steam extraction, these methods still require cleaning
and foaming chemicals to be mixed with water and then applied to the carpet.
The expanding foam is intended to lift particles out of the carpet for
extraction with a vacuum process or dry pad buffing. An alternative method
uses carbonated water designed to effervesce soil from the carpet. The
residue is then buffed out with a cotton towel on a buffing machine. The
carpet fiber does not get as wet as with the steam extraction method, but the
vacuuming of foam and the buffing of carbonated chemicals does not remove
soils and surfactants with the efficiency of VenturiClean-SM-. Carpet fibers
are also damaged by the buffing process.
The oldest carpet cleaning method uses a rotary shampoo machine. The carpet
is scrubbed with a rotary buffing machine to shampoo soap into the carpet
with a bristle pad and then the carpet is vacuumed while still wet. This
method also wets the carpet backing and pad and leaves behind surfactant
based residue.
MARKETING
The primary method utilized by Venturi to sell carpet cleaning services to
individuals is through mass marketing, using billboards, radio, television,
distribution of coupons, yellow pages advertising, local publications, door
hangers, and door to door sales. In addition, Venturi participates in trade
shows and local chamber of commerce events, such as golf tournaments and
luncheons.
Multi-family carpet cleaning services are promoted in this manner, and also
through advertising in industry publications, targeting of national apartment
management companies and demonstrations. Services for commercial properties
are marketed to building maintenance companies, and through demonstrations
and participation in local building management associations. Finally,
restoration services are marketed primarily through industry publications and
participation in industry associations and trade shows, and are marketed
largely to insurance companies and insurance adjusters.
RAW MATERIALS; PATENTS; LICENSES; TRADEMARKS AND SERVICE MARKS
Venturi's proprietary technology permits it to remove virtually all of the
dirt, soils and residue from a carpet; most other methods commonly in use by
Venturi's competitors remove much less of the dirt, soils and residue.
Further, through use of Venturi's proprietary technology, which removes
virtually all of the fluids used in its process, carpets dry within hours of
cleaning, whereas the drying time can extend up to several days using the
methods of Venturi's competitors. Venturi has received two patents relating
to its equipment and technology. One relates to the use of EO water in a
carpet cleaner and system, and the other relates to the water heater attached
to the carpet cleaning wand to flash heat the cleaning fluid at the carpet
surface. The United States Patent and Trademark Office has issued a notice of
allowance for the carpet cleaner patent application.
Venturi licenses some of its technology from several sources. The raw materials
necessary for the delivery of Venturi's services are: EO water, trucks and
utility shells, and cleaning units. Venturi produces its own EO water using
equipment purchased from Primacide, Inc., a Delaware corporation, pursuant to an
Exclusive Use and Purchase Agreement between Venturi and Primacide, LLC, which
agreement has been assumed by Primacide, Inc. Venturi owns 7% of the outstanding
stock of Primacide, and Beaulieu Group, LLC owns 5% of the outstanding stock of
Primacide. Approximately 35% of Primacide is owned by a limited liability
company of which Gaylord Karren, co-founder and Vice Chairman of the Board of
Venturi, and John Hopkins, co-founder and President of Venturi, each own 17.5%.
Each operating base must have a machine for the manufacture of EO water. Venturi
has in the past purchased these machines from an unrelated third party at a cost
of $6,000 per machine. Primacide has manufactured a new,
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more efficient model of this machine, which will be available to Venturi at a
price of $9,500 per machine. No payments have yet been made to Primacide for
EO water manufacturing machines, and Venturi expects to fund purchases from
Primacide under capital leases. Venturi expects to begin acquiring and using
the new model as soon as it is available, and to replace the old machines as
cash flow permits. Venturi does not own any patents or other intellectual
property rights related to the production of EO water or the manufacture of
the machines acquired from Primacide. The Primacide agreement grants Venturi
the worldwide rights to use and exploit the EO technology in the carpet
cleaning and ventilation duct cleaning industries, and allows Venturi to
purchase its entire requirements for EO machines. The Primacide agreement
runs until May 5, 2003, but is automatically renewed on a yearly basis
thereafter. It may be terminated by either party after 120 days written
notice or after 30 days written notice if the other party fails to comply
with its terms.
Venturi is a party to a Requirements Contract with DT Enterprises, a
California proprietorship, dated February 15, 1996, pursuant to which it
purchases its requirements for the Clean Right carpet cleaning solution. The
contract has no minimum purchase requirements, and the cleaning products are
priced at DT Enterprises' current list prices. The contract runs for a period
of 10 years from its date, and may be extended for an additional term of 10
years at Venturi's option.
Venturi has contracted with Vortex/Aero-Tech of Salt Lake City, Utah, a
manufacturer of professional carpet cleaning equipment to manufacture and
assemble the Venturi truck mount units, which employ the VenturiClean-SM-
technology. Vortex/Aero-Tech has the capacity to meet Venturi's truck
production schedule for the foreseeable future. Even if this were not the
case, the items manufactured by Vortex/Aero-Tech are readily obtainable from
other sources. Vortex/Aero-Tech does not provide carpet cleaning or
restoration services, and is not a competitor of Venturi.
Venturi has received a patent on the heaters manufactured by T-Co
Manufacturing. The heating unit is an electronically monitored dual flow
flash heater, which permits detailed control of the water temperature,
enabling Venturi to deliver water to the carpet fibers at a constant
temperature.
Venturi has filed an application to register the mark VenturiClean with the
United States Patent and Trademark Office. Venturi intends to apply for
trademark or service mark registration as additional terminology for its
services and products are developed.
MANUFACTURING
Venturi has no separate manufacturing facility. Rather, all of its
manufacturing is performed off site by ventdors on an as-needed basis.
CUSTOMERS
Venturi's customers consist principally of individuals located in those
states in which Venturi has an operating base, as well as property management
companies, commercial property owners and managers, and insurance companies.
No single customer accounts for five percent (5%) or more of Venturi's sales.
The largest concentration of Venturi's customers are presently in Texas.
Venturi has no present plans to market its services outside the United States
in the foreseeable future.
GOVERNMENT REGULATION
Venturi's present operations are not subject to special regulatory controls.
COMPETITION
In a study conducted by Combustion Resources, a Utah limited liability
company, EO water processed through the modulator box that comprises part of
the VenturiClean-SM- System decreased the surface tension sufficiently to
permit the wand-lift system to remove virtually all of the test stains
cleaned in the study (soil and carbon powder, and barbecue sauce and animal
fat). An additional effect of the use of the modulator box is the prevention
of scale buildup and improved cleaning performance. Further, the use of EO
water showed very fast bacterial kill rates, thereby providing a sanitizing
effect.
Despite these technological improvements, Venturi remains subject to
significant competition. The carpet cleaning industry is highly fragmented,
with thousands of companies nationwide, many of which are sole
proprietorships. Venturi faces further competition in recruitment of
personnel and distributors. Some of Venturi's competitors are substantially
larger and have available considerably greater financial resources than
Venturi. Venturi's ability to remain competitive depends, in significant
part, on Venturi's ability to continue its acquisition program and to recruit
and retain personnel. Although Venturi believes its benefit and compensation
plans, and other incentive programs provide its employees with significant
earning potential, there can be no assurance that Venturi's programs for
recruitment and retention of personnel will be successful.
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Venturi cannot guarantee that its competitors will not develop proprietary
systems with capabilities similar to the VenturiClean-SM- System without
violating any of Venturi's intellectual property rights.
RESEARCH AND DEVELOPMENT
In 1997, Venturi commissioned an analysis of carpet cleaning systems by
Combustion Resources, a Utah limited liability company, which produced a
report on September 19, 1997, comparing VenturiClean-TM- with the standard
carpet cleaning methods described above. The analysis was performed by Dr. L.
Douglas Smoot, the past Dean of the College of Engineering and Technology,
professor of Chemical Engineering and current Director of the Advanced
Combustion Engineering Research Center at Brigham Young University. Dr. Smoot
concluded that use of these proprietary components removed over 99% of
micro-organisms from carpet, thus achieving a significant level of carpet
decontamination.
There are no long term studies on the effect of prolonged exposure to EO
water. Although Venturi believes such exposure has no known side effects,
Venturi has not commissioned any study of same.
EMPLOYEES
As of March 31, 2000, Venturi had 475 full-time employees. These numbers
include personnel located at Venturi's corporate headquarters in Utah, as
well as at its 24 operating bases in Utah, Texas, California, Arizona,
Nevada, Florida, Kentucky, Oregon, Washington, Georgia, Colorado and
Vancouver, British Columbia. Venturi considers its employee relationships to
be satisfactory. None of Venturi's employees is a member of any labor union,
and Venturi has never experienced any business interruption as a result of
any labor disputes.
ITEM 2. DESCRIPTION OF PROPERTIES
FACILITIES
Venturi rents its headquarters building, located in Orem, Utah, and the
following additional facilities, which have lease terms between 6 months and
10 years, and lease payments between $675 to $9,000:
<TABLE>
<CAPTION>
PURPOSE LOCATION
<S> <C>
Headquarters 763 North 530 East, Orem, Utah
Operating Base 1327 North State, Orem, Utah
Operating Base 5709 "D" 40th Street, Lubbock, Texas
Operating Base 3322 Garden Brook Drive, Farmer's
Branch (Dallas), Texas
Operating Base 220 West Cottage, Sandy, Utah
Operating Base (restoration) 165 North 1330 West Bldg. A1, Orem,
Utah
Operating Base 42257 6th Street West #301,
Lancaster, California
Operating Base 2121 Brittmoore, Houston Texas
Operating Base 5327 Jacuzzi Street, Richmond,
California
Operating Base (restoration) 3300 Garden Brook Drive, Farmer's
Branch (Dallas), Texas
Operating Base 3111 South Valley View Drive #N101,
Las Vegas, Nevada
Operating Base 841 West Fairmont #10, Tempe,
Arizona
Operating Base (restoration) 4662 South 200 West, Murray, Utah
Operating Base 5955 Richard Lane West,
Jacksonville, Florida
Operating Base 2314 Watterson Trail, Louisville,
Kentucky
Operating Base 2321 Fortune Drive, Suite 105,
Lexington, Kentucky
Operating Base 6080 134 B Street, Surrey, British
Columbia, Canada
Operating Base 15615 S.W. 74th Avenue #150, Tigard,
Oregon
Operating Base 600 South Smithers Avenue South,
Renton, Washington
Operating Base 4420-I Metric Drive, Winter Park,
Florida
Operating Base 5906 Jet Port Industrial Blvd.,
Tampa, Florida
Operating Base 10233 N.W. 53rd Street, Sunrise,
Florida
Operating Base 5894 Goshen Springs Road, Norcross,
Georgia
Operating Base 6295 East 56th Avenue, Commerce
City, Colorado
Operating Base 3835 Radiant Drive, #655, Colorado
Springs, Colorado
</TABLE>
7
<PAGE>
Venturi believes that each of its facilities is suitable for its current use.
Venturi also believes that upon expiration of the current lease terms,
alternate space would be available at reasonable cost for continuation of its
business.
Venturi has entered into a Master Lease Agreement with Franklin Funding, Inc.
for the leasing of VenturiClean Trucks and EO Machines. Pursuant to this
Master Lease Agreement as of December 31, 1999 Venturi had capitalized 110
trucks and 20 EO machines and other misc. equipment. This lease provided for
an escalating interest rate, a 5% late fee provision, and a fair market
buyout at the end of the lease term ranging from 3 to 5 years. In April 2000,
84 of the existing truck leases were renegotiated eliminating the escalating
interest rate, the 5% late fee, and changing the buyout to a fixed amount of
$1,500 per truck. In addition the next 40 truck lease was negotiated with
similar terms.
Venturi also has outstanding leases for approximately 20 previous model
trucks with Sentry Financial and Commercial Money Center. These leases began
to expire in fall of 1999 and will be totally expired by December 31, 2000.
ITEM 3. LEGAL PROCEEDINGS
Venturi is currently a party to a lawsuit, captioned HAL B. PHILLIPS, BEVERLY
H. PHILLIPS AND QUALITEK SUPPLY, INC. V. VENTURI TECHNOLOGY ENTERPRISES,
INC., GAYLORD KARREN, JOHN HOPKINS, WILLIAM C. THOMAS, MERRILL L. LITTLEWOOD
AND JAMES A. FRAME, Cause No. 98-03695, 126th District Court, Travis County,
Texas. The lawsuit arose out of the acquisition of plaintiff's business
assets on March 30, 1996, pursuant to an Asset Purchase Agreement. In
approximately August 1996, Venturi terminated its relationship with the
plaintiffs and in April 1997 filed a lawsuit in Utah State Court alleging
that Hal B. Phillips, Beverly Phillips and Qualitek Supply, Inc. made
misrepresentations to Venturi to induce Venturi to acquire the assets and had
breached the Asset Purchase Agreement, and requesting that the Asset Purchase
Agreement be rescinded or terminated. The Utah State Court action was
dismissed on the grounds that the Utah court did not have personal
jurisdiction over the defendants, who were residents of the State of Texas,
and did not have sufficient contacts with the State of Utah. On April 8,
1998, the Phillips and Qualitek filed this action in Texas State Court
alleging violations of Texas securities laws in connection with the issuance
of 100,000 shares of Venturi Common Stock in exchange for the assets of
Qualitek, as well as fraud, negligent misrepresentation, breach of contract
and conversion, and seeking damages in the amount of $2,500,000. Venturi has
filed an answer and counterclaim asserting the same claims as in the Utah
state action. Venturi intends to vigorously defend this lawsuit. Discovery
has not yet been completed, and it is difficult to evaluate the likelihood of
an unfavorable outcome to Venturi. During pre-litigation settlement
negotiations, the plaintiffs provided Venturi with a detailed itemization of
their claimed damages in the amount of $57,000. Therefore, Venturi believes
the actual damages are substantially less than the amount requested. As a
result, Venturi believes that any damage award should not be material;
however, there can be no assurance that this will be the case. Venturi's
operations could be jeopardized to the extent a damage award exceeded the
amount of liquid assets available for payment of such award.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Security Holders during the
fourth quarter of the year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR COMMON STOCK
Beginning in July, 1997, Venturi's Common Stock has been quoted on the OTC
Bulletin Board under the trading symbol "VTIX." The following are the high
and low closing bid prices of the Common Stock on the OTC Bulletin Board as
reported by the NASDAQ Trading & Market Services of The Nasdaq Stock Market,
Inc. for the periods indicated.
<TABLE>
<CAPTION>
BID PRICE
PERIOD --------------
CALENDAR YEAR HIGH LOW VOLUME
------------- ---- --- ------
<S> <C> <C> <C>
1998
First Quarter 5-7/8 5-3/8 26,700
Second Quarter 7-1/4 3-1/2 48,700
Third Quarter 4 2-1/4 35,200
Fourth Quarter 2-7/8 1-1/4 109,300
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C>
1999
First Quarter 6 1-1/4 387,900
Second Quarter 6 2-1/2 364,500
Third Quarter 4 2 249,900
Fourth Quarter 3-11/16 1-7/8 1,283,300
</TABLE>
The bid prices represent quotations between dealers without retail
markups, markdowns or commissions and do not necessarily represent actual
transactions.
The Company has never paid any cash dividends on its Common Stock
and does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain future earnings,
if any, to fund the development and growth of the Company's proposed business
and operations.
At March 31, 2000, there were 182 holders of record of the Company's
13,531,247 shares of Common Stock outstanding, 34 holders of record of the
64,410 shares of Series A Preferred Stock outstanding (convertible into
70,438 shares of common stock), one holder of record of the 238,000 shares of
Series B Preferred Stock outstanding (convertible into 1,190,000 shares of
common stock), one holder of record of the 552,845 shares of Series C
Preferred Stock outstanding, one holder of record of the 2,303,738 shares of
Series D Preferred Stock outstanding (convertible into 4,607,476 shares of
common stock), no holders of Series E Preferred Stock, and one holder of
record of the 100,000 shares of Series F Preferred Stock outstanding
(convertible into 500,000 shares of common stock).
At March 31, 2000, there were warrants outstanding to purchase a
total of 3,087,768 shares of the Company's common stock at prices ranging
from $0.01 to $6.00 per share. At March 31, 2000, there were options
outstanding to purchase a total of 4,004,894 shares of the Company's common
stock at prices ranging from $0.01 to $3.00 per share.
RECENT SALES OF UNREGISTERED SECURITIES
During 1999, Venturi completed the following sales of unregistered securities:
A. Between November 1998 and February 1999, Venturi sold a total of
3,545,455 shares of common stock to Cochran Consulting, an accredited
investor whose principals had a pre-existing relationship with Venturi,
in an isolated transaction for $0.33 per share.
B. Between February 1998 and March 1999, Venturi sold a total of 552,854
shares of Series C Preferred Stock to Invest Linc Emerging Growth Fund,
an accredited investor whose principals had a pre-existing relationship
with Venturi, in an isolated transaction for $2.05 per share. Each one
share of Series C Preferred Stock is convertible into one share of
common stock, and is accompanied by a five year warrant to purchase one
share of common stock for $2.05 per share.
C. In April 1999, Venturi sold 2,303,738 shares of Series D Preferred
Stock to Beaulieu Group, LLC, an accredited investor, in an isolated
transaction for $1.30 per share. Each one share of Series D Preferred
Stock is convertible into two shares of common stock.
D. In June 1999, Venturi sold 1,600,000 shares of common stock to
Greenwich AG, a German investment fund that is an accredited investor,
in an isolated transaction for $1.25 per share.
E. In September 1999, Venturi sold a total of 550,000 shares of common
stock to the following three German individuals, each of whom is an
accredited investor, in an isolated transaction for $2.00 per share:
Michael Jahr (450,000 shares), Helmut Heinzel (50,000 shares), and
Thomas Heinzel (50,000 shares).
F. In December 1999, Venturi sold 5,000 shares of Series E Preferred Stock
to Aspen Capital Resources, LLC, an accredited investor, in an isolated
transaction for $100.00 per share. Each share of Series E Preferred
Stock is convertible into common stock at a conversion price between
$2.00 and $3.00 per share, depending on the market price for Venturi's
stock. In February 2000, the 5,000 shares of Series E Preferred Stock
were converted to 250,000 shares of common stock. In December 1999
Venturi also granted to Aspen Capital Resources a four year warrant to
purchase 250,000 shares of common stock for $2.40 per share.
G. In January 2000, Venturi sold an additional 15,000 shares of Series E
Preferred Stock to Aspen Capital Resources, LLC, an accredited
investor, in an isolated transaction for $100.00 per share. Each share
of Series E Preferred Stock is
9
<PAGE>
convertible into common stock at a conversion price between $2.00 and
$3.00 per share, depending on the market price for Venturi's stock. In
February 2000, the 15,000 shares of Series E Preferred Stock were
converted to 750,000 shares of common stock. In January 2000 Venturi
also granted to Aspen Capital Resources a four year warrant to
purchase 533,333 shares of common stock for $3.00 per share.
H. In March 2000, Venturi sold 100,000 shares of Series F Preferred Stock
to BER Investments, Ltd., an accredited investor, in an isolated
transaction for $10.00 per share. Each share of Series F Preferred
Stock is convertible into five shares of common stock. In March 2000
Venturi also granted to BER Investments, Ltd. a five year warrant to
purchase 391,666 shares of common stock for $2.81 per share.
I. In March 2000, Venturi sold 400,000 shares of common stock to Mike
Meadows, an accredited investor, in an isolated transaction for $2.50
per share.
J. During 1999, Venturi acquired all of the stock or assets of carpet
cleaning or restoration businesses in exchange for certain
consideration that included common stock. The individuals or companies
to whom these shares were issued, and the dates of issuance, are as
follows:
<TABLE>
<CAPTION>
NAME NO. SHARES DATE
---- ---------- ----
<S> <C> <C>
James D. Flohr 3,750 8/3/99
Clifford D. Averre 3,750 8/3/99
Jeffery L. Leavitt 25,000 10/14/99
MPI of Nevada 10,000 10/15/99
MPI of Arizona 40,000 11/15/99
Jon T. and Bridget Freeberg 160,436 12/15/99
MPI of Northern Florida 8,500 12/13/99
</TABLE>
K. In March 2000, Venturi acquired all of the remaining MPI entities (MPI
of So. Florida, MPI of Washington, MPI of Georgia, MPI of Florida,
Inc., MPI of Oregon, Inc., Martin & Peterman, Inc., dba MPI of
Colorado, and All Fours Distributing, Inc.) in exchange for certain
consideration that included common stock. The individuals or companies
to whom these shares were issued (all on March 31, 2000) are as
follows:
<TABLE>
<S> <C>
Eikov Enterprises, Inc. 12,250
Delabarre Enterprises, Inc. 24,500
McNamara Enterprises, Inc. 36,750
Mitchell J. Martin 372,750
Lloyd E. Peterman 372,750
</TABLE>
REPORT ON REGISTRATION OF COMMON STOCK ON FORM S-3
On February 14, 2000 a Registration Statement on Form S-3 filed by the
Company was declared effective by the Securities and Exchange Commission
(file no. 333-94517). The Registration Statement registered for resale
10,673,579 shares of Common Stock to be issued upon conversion of the Series
A, B, D and E Preferred Stock, and to be issued upon exercise of warrants and
options granted to Sentry Financial, Franklin Funding, Inc., Aspen Capital
Resources, LLC and Equity Services, Ltd. It also registered common stock held
by Aspen Investments, Entrepreneurial Investors, Ltd., Equity Services, Ltd.,
Greenwich AG, Helmut Heinzel, Thomas Heinzel, Michael Jahr, Peninsular Corp.,
Prism, Inc., Securitron, Ltd., and James and Patrice Stone.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations, which should be read in conjunction with
the Financial Statements (including the notes thereto), contains forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The Company believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge of its business and
operations. The Company's actual results could differ materially from those
anticipated in these forward looking statements as a result of certain
factors discussed in this section.
GENERAL
Venturi was formed in 1997, but has operational and financial data from prior
periods as a result of the operations of its predecessor, which was formed in
1994. That company is now a wholly owned subsidiary of Venturi. See
"Venturi's Business-History and Development." Venturi's management has
formulated a strategy that calls for it to consolidate the fragmented carpet
cleaning
10
<PAGE>
industry by purchasing companies operating in particular locations, and
converting the acquired companies to use of Venturi's proprietary processes.
Venturi acquires unrelated companies that typically are much smaller than
Venturi. Ordinarily, the owners of the target company exchange all or
substantially all of the target company's assets or stock for a combination
of Venturi common stock, cash and promissory notes. Prior to 1999, the
Company structured its acquisitions as pooling-of-interest business
combinations. All of the acquisitions done in 1999 and 2000 are accounted for
using the purchase method of accounting. Each target company is similar to
other target companies such that separate segment disclosures of each
acquisition are not required to fairly state Venturi's financial condition.
The combined entities will record assets and liabilities in accordance with
generally accepted accounting principles. Venturi's management anticipates no
adjustments to net assets of any of the combined entities to comply with or
adopt the same accounting principles or the same fiscal years. Under the
pooling-of-interests method of accounting, the retained earnings accounts of
all entities will be combined.
The primary costs of operating Venturi's business are the trucks and vans
used to house the cleaning equipment, labor and cleaning equipment and
supplies.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUES. Revenues increased by 58.3% to $9,956,218 for the year ended
December 31, 1999 compared to $6,290,886 for the year ended December 31,
1998. This increase in revenues was attributable primarily to the Company's
growth into new geographic areas by virtue of acquisitions of carpet cleaning
companies, and to increased market penetration in geographic areas where the
Company has acquired new bases of operations. The Company also increased its
marketing activities during 1999.
OPERATING EXPENSES: Operating expenses totaled $16,673,406 for the year ended
December 31, 1999, an increase of 44.4% from $11,544,356 for the year ended
December 31, 1998. This increase is primarily attributable to the following:
$1,514,365 expenses for compensatory stock options and warrants granted to
key management personnel and investment bankers; $545,759 write-off of
un-collectable receivables; and increased expenses attributable to new
acquisitions.
INTEREST EXPENSE: The company's interest expense increased by 83.8% to
$1,571,602 for the year ended December 31, 1999 compared to $854,941 for the
year ended December 31, 1998. This increase was due to the increase of 84
VenturiClean Trucks in 1999 which were treated as capital leases resulting in
higher interest and depreciation expenses and a one-time $836,000 charge
incurred in the re-negotiation of truck leases reducing the rate from 18% to
11% annual percentage rate.
LOSSES FROM OPERATIONS: Losses from operations increased to ($6,717,188) for
the year ended December 31 1999, a 27.9% increase from ($5,253,470) for the
prior year. This increase was a result of the increase in operating expenses
(explained above).
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1999, Venturi received $7,530,000 in new
funding from the sale of common and preferred stock, compared with $5,087,214
in new funding during the year ending December 31, 1998. New funding in 1999
was primarily provided by $3,000,000 from the private placement of Series D
Preferred Stock to Beaulieu Group, LLC in April 1999, $2,000,000 from the
private placement of common stock to Greenwich AG in June 1999, $1,100,000
from the private placement of common stock to Messrs. Jahr, Heinzel and
Heinzel in September 1999, and $500,000 from the first tranche of a
$2,000,000 private placement of Series E Preferred Stock to Aspen Capital
Resource Partners, LLC in December 1999.
During January 2000 the Company replaced an accounts receivable factoring
arrangement with a $1,000,000 loan secured by accounts receivable provided by
Aspen Capital Resources Partners, LLC. The loan calls for interest only
payments, on a weekly basis, until June 6, 2000, at which time the principal
and all accrued but unpaid interest are due and payable. Interest on the loan
accrues at the rate of 55% per annum. Negotiations are underway with various
potential lenders to replace this loan with a loan or line of credit with a
lower interest rate.
During the first quarter of 2000, the Company received the remaining
$1,500,000 from the sale of Series E Preferred Stock to Aspen Capital
Resources Partners, LLC, as well as $1,000,000 from the sale of Series F
Preferred Stock to BER Investments, Ltd., a family limited partnership
managed by the Company's newly appointed Chairman of the board Bruce E.
Ranck, and $1,000,000 from the sale of common stock to Mike Meadows, owner of
a major carpet retailer located in the state of Georgia. During the first
quarter of 2000, the Company has obtained commitments for additional equity
financing in excess of $2 million. Management of the Company believes the
present commitments for additional equity financing, combined with extensive
cost cutting measures
11
<PAGE>
implemented by new management and an anticipated increase in revenue as the
Company enters its busiest months, should be sufficient to cover the
Company's continued operations through the second quarter of 2000.
At December 31, 1999, Venturi had a cash balance of $242,786, compared to
$266,931 at December 31 of the prior year. At December 31, 1999, Venturi had
a negative working capital balance of ($3,095,275), compared to ($2,946,122)
at December 31, 1998.
Venturi's accounts receivable increased to $971,883 for the period ending
December 31, 1999 compared to $548,449 for the period ending December 31,
1998. The increase in accounts receivable was attributable primarily to the
Company's 1999 acquisitions of independent carpet cleaning businesses that
carried large accounts receivable balances on their books.
SEASONALITY
Venturi's business varies moderately from season to season, with its highest
revenues being produced in the summer months, and its lowest revenues coming
in the months November through January.
INFLATION
Inflation historically has not had a material effect on Venturi's operations.
When the price of raw materials has increased, the costs have been built into
the pricing structure. Venturi does not have either long-term supply
contracts or long-term contracts with customers. Prices are determined
centrally, and are quoted based on the prevailing market trends. Accordingly,
Venturi does not believe inflation will have a material effect on its future
operations.
PLAN OF OPERATION
Venturi intends to enter large new markets primarily through acquisitions.
The Company is currently evaluating the possibility of franchising into
smaller geographic markets, such as those areas with fewer than approximately
500,000 residents. Although no final decision has been made with respect to
franchising, management believes that franchising into those small markets
that the Company will not otherwise enter for several years may represent the
best way to achieve its goal of having a national presence.
When the Company acquires an independent carpet cleaning business, the
acquired company is converted to the VenturiClean-SM- System, new Venturi
trucks are deployed into the area and the acquired company's old equipment is
sold into the used market. In selecting a new market, Venturi's primary goal
is to identify a market that has the potential to produce $100,000 in monthly
revenues within six months after consummation of the acquisition. Venturi
looks for the following attributes in acquisition candidates: five years
successful operations within the market; favorable financial condition;
reputation for quality service and integrity; quality management dedicated to
aggressive growth; willingness to accept stock in exchange for assets; and
historic annual revenue in excess of $1,000,000. Where possible, Venturi
seeks to acquire market leaders or those businesses with the largest market
share. Venturi receives regular inquiries from other companies in the
industries desiring to have access to the VenturiClean-SM- System and to
become part of a larger organization. As Venturi's presence moves nationwide,
it is anticipated that the inquiries from independent carpet cleaning
companies will increase and the Company will be in a good position to pick
and choose its acquisition candidates.
On March 31, 2000, the Company completed its acquisition of the assets and/or
stock of several related carpet cleaning entities known as MPI. During 1999
Venturi had acquired MPI businesses located in Las Vegas, Phoenix,
Jacksonville and Vancouver, British Columbia. With the March 31, 2000
closing, the Company acquired MPI businesses located in Portland, Oregon;
Seattle, Washington; Miami, Orlando and Tampa, Florida; Atlanta, Georgia; and
Colorado Springs and Denver, Colorado.
As of March 31, 2000, Venturi had approximately 185 carpet cleaning and
restoration trucks in operation.
YEAR 2000
The Company believes it has resolved the potential impact of the Year 2000 on
its processing of date-sensitive information and network systems. As of March
31, 2000, the Company has not experienced any significant negative effects
due to the Year 2000 problem, either internally or with its customers or
vendors. The Company's Year 2000 efforts involved a review of all information
systems, both hardware and software, and installing upgrades to its computer
systems as needed. The Company's costs related to its Year 2000 systems
review and upgrade were not significant. There can be, however, no assurance
that the Company will not incur any additional unforeseen expenses.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company are included beginning
immediately following the signature page to this report.
12
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
On March 9, 2000, Venturi's board of directors increased from three to seven
members. The new board of directors realigned management of the Company, and
brought in several new executive officers who have extensive experience in
growing and operating a carpet cleaning services business and in
consolidating a fragmented industry. The following table sets forth certain
information regarding the directors and executive officers of Venturi after
March 9, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bruce E. Ranck 51 Chairman, Director
Michael F. Dougherty 46 Chief Executive Officer,
Director
Gaylord M. Karren 50 Vice Chairman, Director
John M. Hopkins 47 President, Director
Mitchell J. Martin 44 Vice President--Carpet,
Director
Stuart W. Thorn 44 Director
Daniel Dornier 38 Director
James K. Stone 35 Vice President--Restoration
Brian W. Warren 39 Vice President--Marketing
Stephen S. Abate 36 Chief Financial Officer
Randy K. Johnson 46 Secretary, General Counsel
</TABLE>
The Bylaws of Venturi provide for a board of directors of between one and
nine members. Prior to March 9, 2000, the board of directors consisted of
Messrs. Karren, Hopkins and Stone. On March 9, 2000, Mr. Stone resigned from
the board and Messrs. Ranck, Dougherty, Martin, Thorn and Dornier were
appointed to fill the vacancy created by Mr. Stone's resignation and the
newly created vacancies. During 1999, the board held six meetings. No
director attended fewer than 75% of all meetings of the board.
The directors of Venturi hold office until the next annual meeting of
stockholders of Venturi or until their successors are elected and duly
qualified. All officers serve at the discretion of the directors.
Prior to March 9, 2000, Venturi did not have an audit committee or a
compensation committee of the board of directors. At its March 9, 2000 board
meeting, Venturi's board established an audit committee consisting of Stuart
W. Thorn (chair), Bruce E. Ranck and Daniel Dornier, all outside directors,
and a compensation committee consisting of Bruce E. Ranck (chair), Stuart W.
Thorn and Gaylord M. Karren. The audit committee oversees all of the
financial functions of the Company, and the Compensation Committee formulates
and establishes compensation policies and guidelines, sets executive
compensation, grants stock options and oversees such other compensation
issues as may come before the board of directors.
BUSINESS EXPERIENCE
BRUCE E. RANCK has served as Chairman of the board of directors
of Venturi since March 9, 2000. Mr. Ranck is
managing partner of True Blue Partners, an
investment partnership located in Houston,
Texas. From 1995 to 1999 Mr. Ranck was President
and Chief Executive Officer of Browning Ferris
Industries, Inc. (BFI), a worldwide leader in
the waste industry, having served as President
and Chief Operating Officer of BFI since 1991,
and as Executive Vice President from 1989 to
1991. Prior to 1989 Mr.
13
<PAGE>
Ranck was Regional Vice President of BFI. BFI
was an early and successful pioneer in the
business strategy of consolidating a highly
fragmented service industry through strategic
acquisitions.
MICHAEL F. DOUGHERTY has served as Chief Executive Officer of Venturi
since February 22, 2000. For 20 years prior to
joining Venturi, Mr. Dougherty was employed in
management capacities by BFI, and Allied Waste
Industries following its acquisition of BFI.
Most recently, Mr. Dougherty was District
Manager for the Eastern Pennsylvania District of
Allied Waste Industries and Area Vice-President
of BFI with responsibilities for a seven state
area. Mr. Dougherty received a BS degree in
accounting from Mount Saint Mary's College in
Emmitsburg, Maryland.
GAYLORD M. KARREN is a co-founder of Venturi, and served as its
Chairman and Chief Executive Officer since the
Company's founding until March 9, 2000. Prior to
founding Venturi, Mr. Karren founded a property
management company; formed and operated oil and
gas ventures; and directed lending operations
for leading banks in Montana. Mr. Karren
obtained his Bachelor of Science degree in
Finance and Banking from Brigham Young
University in 1973; and attended the American
Banking Association Graduate School of Banking
at the University of Oklahoma in 1979.
JOHN M. HOPKINS has served as President and Director since
Venturi's founding. Prior to forming Venturi,
Mr. Hopkins was a property manager, and
co-founded an oil and gas service company. In
addition, he was active in chemical and oil
sales operations. Mr. Hopkins attended Utah
State University, with a pre-engineering
emphasis.
MITCHELL J. MARTIN has served as a director and as Vice President
of Venturi since March 9, 2000. In partnership
with Lloyd E. Peterman, Mr. Martin founded
Martin & Peterman, Inc. ("MPI"), a professional
carpet cleaning services company recently
acquired by Venturi. Prior to its acquisition by
Venturi, MPI had operations in seven states,
generating annual revenue in excess of $11
million. Mr. Martin is one of approximately 200
IICRC Senior Certified Carpet Inspectors
nationwide. This certification is an industry
acknowledgment of expertise in the carpet
cleaning and restoration area. Mr. Martin
attended the University of Pittsburgh.
STUART W. THORN has served as a director of Venturi since March
9, 2000. Mr. Thorn is the President and Chief
Operating Officer of Beaulieu Group, LLC, an
international leader in the manufacture of
carpets and rugs. From 1995 to 1997, Mr. Thorn
was Chief Financial Officer for Beaulieu Group,
LLC. Prior to Joining Beaulieu Group, Mr. Thorn
was Vice President of Finance for the
International Grocery Products Division of the
Campbell Soup Company. Mr. Thorn received a
Bachelor and a Master's degree in Business
Administration from the Wharton School of
Business of the University of Pennsylvania.
DANIEL DORNIER has served as a director of Venturi since March
9, 2000. Mr. Dornier is a Managing Director and
Partner of Greenwich AG, a German Venture
Capital Investment Company. Since 1995 Mr.
Dorneir has managed investment portfolios for
high net worth individuals in Europe. Between
1993 and 1995 Mr. Dornier was a private
investment manager for various family owned
businesses, and prior to that he was an
investment banker at SBC Warburg, Dillon, Reed.
Mr. Dornier obtained an undergraduate degree in
Business Administration from the University of
Nuertingen, Germany, and an MBA from City
University in Bellevue, Washington.
14
<PAGE>
JAMES K. STONE has served as Vice President--Restoration since
March 9, 2000. Prior to that Mr. Stone was a
director of Venturi and was Vice President of
Operations for the Company. Prior to joining
Venturi, Mr. Stone was the founder and chief
operating officer of Pro-Tech Restoration, Inc.
and Stone Flood and Fire, which were acquired by
the Company in 1996. Mr. Stone has also founded
a securities firm.
BRIAN W. WARREN has served as Vice President--Marketing since
March 9, 2000, shortly after he joined Venturi
full time. Prior to joining Venturi, Mr. Warren
was President of MaxCare, the professional
cleaning systems division of Flooring America,
the largest floor covering retailer in the
world. From 1996 to 1998 Mr. Warren was Vice
President of Sales for Image Industries, a major
floor covering manufacturer. He has also served
in executive positions with Mohawk Industries
and Wunda Weve Carpets.
STEPHEN S. ABATE has been Chief Financial Officer of Venturi
since March 27, 2000. During 1998 and 1999, Mr.
Abate managed a 280 person accounting group as
an Area Controller for BFI in a market area with
annual revenues of approximately $1 billion.
From 1997 to 1998, Mr. Abate was an assistant
controller for BFI, and before that was a
Country Controller for BFI Italy and an
Assistant Regional Controller for BFI Europe.
Mr. Abate received a bachelors degree in
Business Administration from the University of
Maryland in College Park, Maryland.
RANDY K. JOHNSON is Secretary and General Counsel of Venturi. He
joined Venturi full time in August 1999, after
nineteen years of private law practice with
various law firms and corporations in Utah and
California. Most recently he was OF COUNSEL with
the Salt Lake City law firm Mackey, Price &
Williams, and before that was a partner with the
Salt Lake City law firm Fabian & Clendenin. In
addition to practicing law, Mr. Johnson has
started, operated and sold several small
businesses. Mr. Johnson received his A.B. degree
from the University of California, Berkeley, and
his J.D. degree from the Boalt Hall School of
Law at the University of California, Berkeley.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers,
directors and persons who own more than ten percent of our common stock to
file certain reports of ownership and changes in ownership with the
Securities and Exchange Commission within specified time periods. Officers,
directors and ten percent shareholders are required by regulation to furnish
us with copies of all Section 16(a) forms they file. Based on our review of
Section 16(a) filings, we are aware that the following officers and directors
were late filing a Form 3 Initial Statement of Beneficial Ownership of
Securities: James K. Stone, Executive Vice President and Director; Randy K.
Johnson, Secretary; Michael F. Dougherty, Chief Executive Officer and
Director; Bruce E. Ranck, Director; Stuart W. Thorn, Director; Daniel
Dornier, Director, and Mitchell J. Martin, Vice President and Director.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information as to the compensation paid to
Venturi's Chief Executive Officer, President, Executive Vice President and
General Counsel for the three years ended December 31, 1999.
15
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------------- ---------------------------
OTHER
ANNUAL RESTRICTED SECURITIES LONG-TERM
NAME AND COMPENSATION STOCK UNDERLYING INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS($) OPTIONS/SARS(#) PAYOUT($) COMPENSATION($)
- -------------------- ---- --------- -------- ------------ ---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gaylord M. Karren, 1999 20,700 0 130,038 0 100,000 0 0
Chairman, CEO and 1998 20,700 0 90,000 0 104,000 0 0
Director (prior 1997 0 0 90,000 0 0 0 0
to 2000) (2)
John M. Hopkins, 1999 20,697 0 126,406 0 100,000 0 0
President and 1998 20,200 0 90,000 0 104,000 0 0
Director (prior to 1997 0 0 90,000 0 0 0 0
2000) (3)
James K. Stone, 1999 63,750 0 0 0 250,000 0 0
Executive VP, 1998 48,000 0 0 0 2,000 0 0
Director (4) 1997 0 0 0 0 0 0 0
Randy K. Johnson, 1999 62,500(5) 0 77,831(5) 0 200,000 0 0
Secretary and 1998 0 0 0 0 0 0 0
General Counsel (5) 1997 0 0 0 0 0 0 0
</TABLE>
(1) During the previous three fiscal years, the Company paid management
fees to Messrs. Karren and Hopkins, or to entities owned principally by
them, in the approximate amounts indicated in the table. These fees
were for services rendered by the officers.
(2) On February 21, 2000, the Company entered into a three (3) month
employment agreement with Gaylord M. Karren, pursuant to which Mr.
Karren will devote full time to the business of the Company as the
Company's Co-founder and Vice-Chairman. Pursuant to the Agreement, the
Company will pay to Mr. Karren a salary at the annualized rate of
$175,000 per year. Upon the expiration or earlier termination of the
Agreement, except for a termination caused by Mr. Karren voluntarily
terminating his employment, the Company shall grant to Mr. Karren a
five (5) year non-qualified stock option to purchase 150,000 shares of
the Company's common stock for $0.01 per share, and the Company shall
pay to Mr. Karren as severance $14,583.33 per month for nine months.
(3) On February 21, 2000, the Company entered into a three (3) month
employment agreement with John M. Hopkins, pursuant to which Mr.
Hopkins will devote full time to the business of the Company as the
Company's Co-founder and President. Pursuant to the Agreement, the
Company will pay to Mr. Hopkins a salary at the annualized rate of
$175,000 per year. Upon the expiration or earlier termination of the
Agreement, except for a termination caused by Mr. Hopkins voluntarily
terminating his employment, the Company shall grant to Mr. Hopkins a
five (5) year non-qualified stock option to purchase 150,000 shares of
the Company's common stock for $0.01 per share, and the Company shall
pay to Mr. Hopkins as severance $14,583.33 per month for nine months.
(4) Mr. Stone was an Executive Vice President and a director of the Company
until March 9, 2000, at which time he resigned as a director and was
appointed as Vice President--Restoration.
(5) On May 1, 1999, the Company entered into a three (3) year employment
agreement with Randy K. Johnson, Secretary and General Counsel of the
Company, pursuant to which Mr. Johnson was to devote at least half of
his working time to the Company, and be paid half salary, until August
1, 1999, at which time he would devote full time to the company at full
salary. Pursuant to the Agreement, the Company will pay to Mr. Johnson
an annual salary of $125,000. In connection with the Agreement, the
Company also granted to Mr. Johnson a ten (10) year non-qualified stock
option to purchase 200,000 shares of the Company's common stock for
$0.01 per share. The option fully vested on December 31, 1999. Prior to
becoming employed by Venturi, Mr. Johnson provided legal services to
Venturi as an attorney in private practice. During the year ended
December 31, 1999, Mr. Johnson was paid $62,500 in salary and $77,831
for legal services as an outside attorney.
DIRECTORS COMPENSATION
No Compensation has been paid to any directors for service in such capacity
in the past, and no such compensation is presently payable to directors, but
directors may be reimbursed for certain expenses in connection with
attendance at
16
<PAGE>
Board and committee meetings. At such time as the Board of Directors deems
appropriate, the Company intends to consider adoption of an appropriate
policy to compensate non-employee directors, to attract and retain the
services of qualified non-employee directors.
COMPENSATION PURSUANT TO BENEFIT PLANS AND ARRANGEMENTS
STOCK OPTIONS
By resolution dated July 1, 1997, Venturi's Board of Directors adopted a Dual
Stock Option Plan, and reserved 2,000,000 shares of the Company's Common
Stock for issuance pursuant to the Plan. The Plan is a continuation of a
similar plan adopted by the Texas Corporation in July of 1996. The Plan,
which is administered by the Board of Directors, allows options to be granted
to either employees of the Company or to consultants (including directors).
Options granted to employees may be either Incentive Stock Options under
Section 422 of the Internal Revenue Code of 1986, as amended, or
Non-Statutory Stock Options at the discretion of the Board. The Board
determines the terms of options granted under the Plan, including the number
of shares subject to the option, exercise price, term and the rate at which
the options become exercisable. The exercise price of all Incentive Stock
Options granted under the Plan must be at least equal to the fair market
value of the Common Stock of the Company on the date the option is granted.
The options have variable vesting schedules, with options granted to
employees vesting in one year from the date of grant, and the term of any
options under the Plan may not exceed ten years. If not terminated earlier,
the Plan will terminate on July 1, 2006. Termination will not affect rights
and obligations granted prior to termination. The Board has the authority to
amend or terminate the Plan so long as such amendment or termination does not
adversely affect any outstanding options.
As of March 31, 2000, a total of 1,822,569 stock options had been granted
under the 1997 Plan. Options granted to employees under the Plan are
generally intended to be Incentive Stock Options, with an exercise price of
$2.40 per share, which represents the fair market value of the Company's
common stock as of the dates the options were granted. The options vest one
year after the date they are granted, have a five (5) year term, and must be
exercised within three (3) months after termination of employment. The
following options that were granted in 1999 have terms different than set
forth above:
1. In August 1999 a ten (10) year Non-Statutory Stock Option was
granted to Randy K. Johnson, Secretary and General Counsel of
the Company, to purchase 200,000 shares for $0.01 per share.
The Option became fully vested on December 31, 1999, and it
may be exercised any time before its ten (10) year expiration
regardless of whether the holder is an employee of Venturi.
2. In April 1999 a ten (10) year Non-Statutory Stock Option was
granted to BJ Mendenhall, Controller of the Company, to
purchase 20,000 shares of common stock at $1.00 per share. The
option vests as to one third of the shares on April 1, 2000
and each year thereafter. The option may be exercised at any
time before its ten (10) year expiration, regardless of
whether the holder is an employee of Venturi.
3. In May 1999 a ten (10) year Non-Statutory Stock Option was
granted to Lewis Migliore, a consultant to the Company, to
purchase 15,000 shares of common stock at $2.50 per share. The
option vests as to one third of the shares on May 1, 2000, and
each year thereafter.
At its Board meeting on March 9, 2000, the 1997 Plan was terminated, and a
new stock option plan designated the 2000 Stock Option Plan was approved,
subject to shareholder approval. A total of 1,750,000 shares will be
allocated to the 2000 Plan.
In December, 1997, Venturi recorded compensation expense of $1,396,000 for
the difference between the exercise price and the fair value of the
underlying stock at the date of grant of 400,000 of the nonqualified options
that had been granted in 1997 (which was $3.50 per share). In December, 1998,
Venturi recorded compensation expense of $836,606
17
<PAGE>
for the difference between the exercise price and the fair value of the
underlying stock at the date of grant for nonqualified options granted in
1998. In December, 1999, Venturi recorded a compensation expense of $604,000
for the difference between the exercise price and the fair value of the
underlying stock at the date of grant for compensatory options granted in
1999.
The following table sets forth information concerning individual grants of
stock options to the Named Executive Officers during the fiscal year ended
December 31, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL EXERCISE OR BASE EXPIRATION
UNDERLYING OPTIONS/SARS OPTIONS/SARS GRANTED TO PRICE DATE
NAME GRANTED EMPLOYEES IN FISCAL YEAR
<S> <C> <C> <C> <C>
Gaylord M. Karren (1) 100,000 9.8% $2.40 1/04
John M. Hopkins (2) 100,000 9.8% $2.40 1/04
James K. Stone (3) 250,000 24.5% $2.40 1/05
Randy K. Johnson (4) 200,000 19.6% $0.01 4/09
</TABLE>
(1) On January 4, 1999, two separate five (5) year stock options were
granted to Gaylord M. Karren, Chairman of the Board and Chief Executive
Officer of the Company, each entitling the holder to purchase 50,000
shares of common stock for $2.40 per share. One of the options for
50,000 shares vested immediately upon grant, and the other option for
50,000 vests one year from the date of grant.
(2) On January 4, 1999, two separate five (5) year stock options were
granted to John M. Hopkins, President and a Director of the Company,
each entitling the holder to purchase 50,000 shares of common stock for
$2.40 per share, to vest one year from the date of grant. One of the
options for 50,000 shares vested immediately upon grant, and the other
option for 50,000 vests one year from the date of grant.
(3) On January 4, 1999, a five (5) year stock option was granted to James
K. Stone, Executive Vice President and a Director of the Company, to
purchase 250,000 shares of common stock for $2.40 per share, to vest
one year from the date of grant.
(4) On August 1, 1999, a ten (10) year stock option was granted to Randy K.
Johnson to purchase 200,000 shares of common stock for $0.01 per share,
which fully vested on December 31, 1999.
The following table sets forth information concerning the exercise of options
by the Named Executive Officers during the fiscal year ended December 31,
1999, as well as the aggregate number and value of unexercised options held
by the Named Executive Officers on December 31, 1999.
18
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS AT
AT DECEMBER 31, 1999(#) DECEMBER 31, 1999($) (1)
----------------------------------------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gaylord M. Karren -0- -0- 154,000 50,000 $321,710 $23,750
John M. Hopkins -0- -0- 154,000 50,000 $321,710 $23,750
James K. Stone -0- -0- 2,000 250,000 $930 $118,750
Randy K. Johnson -0- -0- 200,000 -0- $573,000 $0
</TABLE>
(1) Calculated on the basis of the closing price for the Company's common
stock on the over-the-counter market (OTCBB) for December 31, 1999 of
$2.875 per share, minus the per share exercise price multiplied by the
number of shares underlying the option.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 2000,
regarding ownership of Venturi's Common Stock (i) by each person known by
Venturi to be the beneficial owner of more than 5% of Venturi's outstanding
Common Stock, (ii) by each director of Venturi, (iii) by certain related
stockholders, and (iv) by all executive officers and directors of Venturi as
a group. All persons named have sole voting and investment power with respect
to such shares, subject to community property laws, and except as otherwise
noted. The table includes unexercised options to acquire Common Stock held by
the persons listed. The table assumes that there are 25,541,885 shares of
Common Stock beneficially owned by all shareholders (being the sum of
13,531,247 shares of Common Stock outstanding as of March 31, 2000 plus (i)
2,605,444 shares which may be acquired at any time pursuant to vested
options, (ii) 2,484,435 shares issuable upon exercise of warrants which may
be exercised at any time, (iii) 70,438 shares issuable upon conversion of
64,410 shares of Series A Preferred Stock which the Series A Preferred
Stockholders have the right to acquire at any time, (iv) 1,190,000 shares
issuable upon conversion of 238,000 shares of Series B Preferred Stock which
the Series B Preferred Stockholders have the right to acquire at any time,
(v) 552,845 shares issuable upon conversion of 552,845 shares of Series C
Preferred Stock which the Series C Preferred Stockholder has the right to
acquire at any time, (vi) 4,607,476 shares issuable upon conversion of
2,303,738 shares of Series D Preferred Stock which the Series D Preferred
Stockholder has the right to acquire at any time, and (vii) 500,000 shares
issuable upon conversion of 100,000 shares of Series F Preferred Stock which
the Series F Preferred Stockholder has the right to acquire at any time.
<TABLE>
<CAPTION>
STOCKHOLDER NAME NUMBER OF SHARES BENEFICIALLY OWNED PERCENTAGE BENEFICIALLY OWNED
<S> <C> <C>
5%STOCKHOLDERS
Gaylord M. Karren (1) 1,221,515 4.8%
John M. Hopkins (2) 1,221,515 4.8%
DIRECTORS AND OFFICERS
Bruce E. Ranck (3) 500,000 2.0%
Michael F. Dougherty 0 *
Gaylord M. Karren 1,221,515 4.8%
John M. Hopkins 1,221,515 4.8%
Mitchell J. Martin (4) 387,667 1.5%
Stuart W. Thorn (5) 0 *
Daniel Dornier (6) 1,600,000 6.3%
James K. Stone 324,832 1.3%
Stephen S. Abate 0 *
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C>
Randy K. Johnson 200,000 *
All executive officers and directors
as a group (ten persons) 5,455,529 21.4%
BENEFICIAL STOCKHOLDERS
Beaulieu Group, LLC 4,607,476 18.0%
Greenwich AG 1,600,000 6.3%
Aspen Capital Resources, LLC (7) 1,250,000 4.9%
Entrepreneurial Investors, Ltd. (8) 1,190,000 4.7%
Cochran Consulting 3,545,455 13.9%
</TABLE>
- --------------
* Less than 1%
(1) Includes 204,000 shares of Common Stock for which Mr. Karren holds
options exercisable within sixty days, and 1,017,515 shares owned
outright.
(2) Includes 204,000 shares of Common Stock for which Mr. Hopkins holds
options exercisable within sixty days, and 1,017,515 shares owned
outright.
(3) Consists of 100,000 shares of Series F Preferred Stock convertible into
500,000 shares of common stock, held by BER Investments, Ltd., a Texas
limited partnership of which Mr. Ranck is the managing partner.
(4) Includes 25.5% of the (a) 10,000 shares held of record by MPI of
Nevada, a Colorado general partnership, (b) 40,000 shares held of
record by MPI of Arizona, a Colorado general partnership, and (c) 8,500
shares held of record by MPI of Northern Florida, a Colorado general
partnership.
(5) Although Mr. Thorn is the Chief Operating Officer of Beaulieu Group,
LLC, holder of 2,303,738 shares of Series D Preferred Stock convertible
into 4,607,476 shares of common stock, Mr. Thorn does not have the
power to vote or dispose of such shares.
(6) Includes all 1,600,000 shares held of record by Greenwich AG, a German
investment company of which Mr. Dornier is a managing director and
partner.
(7) Includes all 1,000,000 shares of common stock issued to Aspen Capital
Resources, LLC upon conversion of its Series E Preferred Stock, plus
250,000 shares issuable upon exercise of a warrant that first becomes
exercisable on May 15, 2000. Aspen Capital Resource Partners, LLC also
holds warrants to purchase an additional 783,333 shares which was not
included herein because that warrant does not become exercisable until
June 15, 2000.
(8) Includes common stock issuable upon conversion of Series B Preferred
Stock, held by Entrepreneurial Investors, Ltd., a Bahamas investment
company, of which Robert E. Cordes is the sole director. As such, Mr.
Cordes has the power to vote and direct the disposition of the Series B
Preferred Stock held by Entrepreneurial Investors, Ltd. The stock of
Entrepreneurial Investors, Ltd. is widely held entirely by European
investors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth herein describes certain transactions between the
Company and certain affiliated parties. Future transactions, if any, will be
approved by a majority of the disinterested members of the Company and will
be on terms no less favorable to the Company than those that could be
obtained from unaffiliated parties.
20
<PAGE>
Venturi has outstanding loans from its executive officers and principal
stockholders. It presently owes Gaylord M. Karren $10,527 and James K. Stone
$273,639. The loan from Mr. Karren does not bear interest, is payable on
demand, and has no scheduled repayment terms with the exception of the
payment of $1,965 per month to Mr. Karren to enable him to repay the source
of the loan funds, a second mortgage on his personal residence. The loans
from James Stone bear interest ranging from 9.1125% to 11.5%. Monthly
payments on the loans from James Stone are $6,000.
Venturi issued 700,866 shares of Common Stock to Gaylord M. Karren and John
M. Hopkins in consideration of the assignment to Venturi of certain patent
applications. Venturi owns 7% of the outstanding stock of Primacide, Inc., a
Delaware corporation that provides equipment to Venturi to produce the EO
water used in the VenturiClean-SM- System used by Venturi under an Exclusive
Use and Purchase Agreement between Venturi and Primacide, LLC, which
agreement has been assumed by Primacide, Inc. Beaulieu Group, LLC, a
principal shareholder of Venturi, owns 5% of the outstanding stock of
Primacide, and 35% of Primacide is owned by a limited liability company of
which Gaylord Karren, co-founder and Vice Chairman of the Board of Venturi,
and John Hopkins, co-founder and President of Venturi, each own 17.5%.
Venturi has loaned Primacide $40,024 to fund its ongoing operations. This
loan bears interest at 8% per annum, and is payable on demand at any time
after March 1, 1999.
Randy K. Johnson joined Venturi full time from the private practice of law on
August 1, 1999. During the year ended December 31, 1999, Venturi paid Mr.
Johnson a total of $77,831 for legal services rendered to Venturi prior to
August 1, 1999. Venturi still owes Mr. Johnson $21,760.25 for legal services
rendered prior to August 1, 1999.
21
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(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>
3.0 Articles of Incorporation of Venturi Technologies, Inc.
(Nevada), as amended (1)
3.1 Bylaws of Venturi Technologies, Inc.(1)
3.2 Amended and Restated Articles of Incorporation of Venturi
Technologies, Inc. (Texas) dated 5-23-96 (1)
3.3 Articles of Incorporation of Action Venturi Technology, Inc.
dated 8-15-94 (1)
3.4 Bylaws of Action Venturi Technology, Inc.(1)
3.5 Articles of Incorporation of T-Co Manufacturing, Inc. dated
5-8-97(1)
3.6 Amendment to Bylaws adopted April 14, 1999(3)
3.7 Certificate of Amendment of Articles of Incorporation,
increasing total authorized stock to 32,000,000 shares filed
with Nevada Secretary of State on December 7, 1999
4.0 Specimen Stock Certificate(1)
4.1 Articles of Incorporation of Venturi Technologies, Inc.
(Nevada), as amended pp. 4-5 (See above Exhibit 3.0)(1)
4.2 Bylaws of Venturi Technologies, Inc., pp. 12-13 (See above
Exhibit 3.0)(1)
4.3 Certificate of Designation of Preferences, Limitations, and
Relative Rights for Venture Technology Enterprises, Inc. for
Series A and Series B Preferred Stock dated 12-24-97(1)
4.4 Action by Unanimous Written Consent of the Board of
Directors of Venturi Technologies Inc. Creating Series C
Preferred Stock dated 7-98 with Exhibit(1)
4.5 Registration Rights Agreement with Equity Services, Ltd.
dated 12-31-97(1)
4.6 Registration Rights Agreement with Entrepreneurial
Investors, Ltd. dated 12-31-97(1)
4.7 Lock up Agreement with Equity Services, Ltd. dated
12-23-97(1)
4.8 Lock Up Agreement with Invest Linc Emerging Growth Equity
Fund I, L.L.C. dated 7-28-98(1)
4.9 Master Equipment Financing Agreement with Sentry Financial
Corp. dated 6-18-96(1)
4.10 Master Lease Agreement with Northstar Capital LLC dated
2-17-98(1)
4.11 Certificate of Designation of Series D Convertible Preferred
Stock ($0.001 par value) filed
with Nevada Secretary of State on April 13, 1999(3)
4.12 Certificate of Designation of Series E Cumulative
Convertible Preferred Stock ($0.001 par
value) filed Nevada Secretary of State on December 14, 1999
4.13 Certificate of Amendment of Certificate of Designation of
Series E Cumulative Convertible Preferred Stock filed with
Nevada Secretary of State on approximately January 25, 2000
4.14 Certificate of Designation of Preferences, Limitations and
Relative Rights for Venturi Technologies, Inc., 6%
Cumulative Convertible Series F Preferred Stock filed with
Nevada Secretary of State on March 7, 2000
5.0 Opinion Letter of Mackey Price & Williams regarding Legality
of Securities dated 7-29-98(1)
10.0 Dual Stock Option Plan between Venturi Technology
Enterprises, Inc. and its key employees, officers, directors
and consultants dated 7-1-97(1)
10.1 Form Incentive Stock Option Agreement between Venturi
Technology Enterprises, Inc. and its employees dated
1-1-97(1)
10.2 Form Non-Statutory Stock Option Agreement between Venture
Technology Enterprises, Inc. and its consultants dated
7-1-97(1)
10.3 Non-statutory Stock Option Agreement between Venture
Technology Enterprises, Inc. and Merril Littlewood dated
7-1-97(1)
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
10.4 Requirements Agreement with DT Enterprises dated 2-15-96(1)
10.5 Exclusive Use and Purchase Agreement between Primicide, LLC
and Venturi Technologies, Inc.(1)
10.6 Placement Agent's Option Certificate with Equity Services,
Ltd. dated 6-30-98(1)
10.7 Agreement of Collateral between Gaylord Karren and John
Hopkins and HiTek Carpet Care Inc. dated 3-97(1)
10.8 Patent Application Assignment between John M. Hopkins and
Venturi Technology Enterprises, Inc. dated 12-22-97(1)
10.9 Patent Application Assignment between Gaylord Karren and
Venturi Technology Enterprises, Inc.
dated 12-22-97(1)
10.10 Patent Assignment between John M. Hopkins and Venturi
Technology Enterprises, Inc. dated 12-22-97(1)
10.11 Verified Statement Claiming Small Entity Status by John M.
Hopkins dated 3/17/97(1)
10.12 Verified Statement Claiming Small Entity Status by Gaylord
Karren dated 3-17-97(1)
10.13 Master Equipment Financing Agreement with Sentry Financial
Corp. dated 6-18-96 (See above Exhibit 4.9)(1)
10.14 Master Lease Agreement with Northstar Capital LLC dated
1-17-98 (See above Exhibit 4.10)(1)
10.15 Warrant Purchase Agreement between Northstar Capital, LLC and
Venturi Technology Enterprises, Inc. dated 2-17-98(1)
10.16 Letter from Capital Partners Extending Lease Funding to
Venturi Technology Enterprises, Inc. dated 5-7-98(1)
10.17 Agreement of Purchase and Sale of Assets between Bill Thomas,
d.b.a. T-Co Carpet Cleaning and T-Co Heating Systems, and
Venturi Technologies, Inc. dated 3-96(1)
10.18 Agreement of Purchase and Sale of Assets between Michael
Shurtliff, d.b.a. Protech Carpet Cleaning and Flood
Restoration, and Venturi Technology Enterprises, Inc. dated
3-31-98(1)
10.19 Bill of Sale and Assignment between Michael Shurtliff, d.b.a.
Protech Carpet Cleaning and Flood Restoration, and Venturi
Technology Enterprises, Inc.(1)
10.20 Liabilities Undertaking between Michael Shurtliff, d.b.a.
Protech Carpet Cleaning and Flood Restoration, and Venturi
Technology Enterprises, Inc. dated 4-98(1)
10.21 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Michael Shurtliff, d.b.a. Protech
Carpet Cleaning and Floor Restoration, and Venturi Technology
Enterprises, Inc. dated 4-98(1)
10.22 Agreement of Purchase and Sale of Assets between Reed T. and
Lana B. Buley, d.b.a. Complete Carpet Service, and Venturi
Technology Enterprises, Inc. dated 4-30-98(1)
10.23 Bill of Sale and Assignment between Reed T. and Lana B. Buley
and d.b.a. Complete Carpet Service and Venturi Technology
Enterprises, Inc.(1)
10.24 Liabilities Undertaking between Reed T. and Lana B. Buley
d.b.a. Complete Carpet Service and Venturi Technology
Enterprises, Inc. dated 4-98(1)
10.25 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Reed T. and Lana B. Buley d.b.a.
Complete Carpet Service and Venturi Technology Enterprises,
Inc. dated 4-98(1)
10.26 Letter of Intent re: Proposed Acquisition by Venturi
Technology Enterprises, Inc. of Carpet and Upholstery Cleaning
Assets of Daniel M. Levine(1)
10.27 Agreement of Purchase and Sale of Assets between Daniel M. and
Kathleen L. Levine, d.b.a. All Valley Carpet, All Valley
Carpet & Upholstery and All Valley Restoration Service, and
Venturi Technology Enterprises dated 7-3-98(1)
10.28 Bill of Sale and Assignment between Daniel M. and Kathleen L.
Levine, d.b.a. All Valley Carpet, All Valley Carpet &
Upholstery and All Valley Restoration Service, and Venturi
Technology Enterprises, Inc.(1)
10.29 Liabilities Undertaking between Daniel M. Levine, d.b.a. All
Valley Carpet, All Valley Carpet & Upholstery and All Valley
Restoration Service, and Venturi Technology Enterprises dated
7-3-98(1)
10.30 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking between Daniel M. Levine and Venturi
Technology Enterprises dated 7-3-98(1)
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
10.31 Agreement of Purchase and Sale of Assets between Video Aire
and Venturi Technology Enterprises, Inc. dated 6-30-98(1)
10.32 Letter of Intent re: Proposed Acquisition of Assets between
Dirt Free Carpet & Upholstry [sic] Cleaning Inc. and Venturi
Technology Enterprises dated 6-29-98(1)
10.33 Letter of Intent re: Proposed Acquisition of Assets between
Rob Bleyl d.b.a. Disaster Plus and Venturi Technology
Enterprises, Inc. dated 7-22-98(1)
10.34 Letter of Intent re: Proposed Acquisition of Duct Cleaning
Business of Bob L. Allen dated 7-29-98(1)
10.35 Stock Purchase Agreement between CDL Capital Corp., CDL
Emerging Growth Equity Fund I, L.L.C., Gaylord Karren and John
Hopkins, and Venturi Technology Enterprises dated 4-10-98(1)
10.36 Placement Agreement of Venturi Technology Enterprises, Inc.
with Equity Services, Ltd. dated 12-31-97(1)
10.37 Investor Subscription Agreement of Venturi Technology
Enterprises, Inc. with Entrepreneurial Investors, Ltd. dated
12-31-97(1)
10.38 Soliciting Dealer Agreement between Dominion Capital and
Venturi Technologies, Inc. dated 8-9-96(1)
10.39 Agreement and Plan of Reorganization of Venturi Technologies,
Inc. and HiTek Carpet Care Inc. dated 5-15-97(1)
10.40 Stock-for-Stock Reorganization Agreement between HiTek Carpet
Care, Inc. and stockholders of Venturi Technologies, Inc.
dated 6-9-97(1)
10.41 Promissory Note between HiTek Carpet Care, Inc. and Venturi
Technologies, Inc. dated 5-31-97(1)
10.42 Business and Financial Advisory Agreement between CDL Capital
Corp. and Venturi Technology Enterprises, Inc. dated
3-10-98(1)
10.43 Application for Certificate of Authority to Transact Business
in Texas by Venturi Technology Enterprises, Inc.(1)
10.44 Consent of Combustion Resources, L.L.C. dated September 29,
1988(2)
10.45 Agreement of Purchase and Sale of Assets dated as of August
14, 1998 re Dirt Free Carpet and Upholstery Cleaning, Inc.(2)
10.46 Non-Competition, Confidentiality and Continuity of Business
Dealings Undertaking dated as of August 14, 1998(2)
10.47 Employment Agreement with Robert Bleyl dated October 5,
1998(2)
10.48 Employment Agreement with David J. Bleyl dated October 5,
1998(2)
10.49 Agreement of Purchase and Sale Assets dated as of October 5,
1998 with Disaster Plus corp., Robert D. Bleyl and David J,.
Bleyl(2)
10.50 Stock Purchase Agreement, dated April 14, 1999 between Venturi
Technologies, Inc. and Beaulieu Group, LLC(3)
10.51 Marketing Agreement, dated April 14, 1999 between Venturi
Technologies, Inc. and Beaulieu Group, LLC(3)
10.52 Registration Rights Agreement, dated April 14, 1999 between
Venturi Technologies, Inc. and Beaulieu Group, LLC(3)
10.53 Lock-up Agreement, dated April 14, 1999, executed by Gaylord
Karren in favor of Beaulieu Group, LLC(3)
10.54 Lock-up Agreement, dated April 14, 1999, executed by John
Hopkins in favor of Beaulieu Group, LLC(3)
10.55 Securities Purchase Agreement, dated June 3, 1999 between
Venturi Technologies, Inc. and Greenwich A.G.(4)+
10.56 Registration Rights Agreement dated June 3, 1999 between
Venturi Technologies, Inc. and Greenwich A.G.(4)
10.57 License Right of First Refusal Agreement dated June 3, 1999
between Venturi Technologies, Inc. and Greenwich A.G.(4)
10.58 Lock-up Agreement, dated June 3, 1999, executed by Gaylord
Karren in favor of Greenwich A.G(4)
10.59 Lock-up Agreement, dated June 3, 1999, executed by John
Hopkins in favor of Greenwich A.G.(4)
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
10.60 Lock-up Agreement, dated June 3, 1999, executed by Greenwich
A.G. in favor of Venturi Technologies, Inc.(4)
10.61 Warrant to Purchase Shares of Common Stock, dated June 3,
1999, between Venturi Technologies, Inc. and Greenwich A.G.(4)
10.62 Restated Global Agreement for Purchase and Sale between
Venturi Technologies, Inc. and various seller entities as
described therein, dated October 19, 1999(5)
10.63 Agreement for Purchase and Sale of Assets between MPI of
Nevada, a Colorado general partnership, and Venturi
Technologies, Inc. dated October 19, 1999(5)
10.64 Stock Purchase Agreement between All Fours Distributing, Inc.
and Jason Dupuis (as the shareholders of 593693 B.C. LTD.) and
Venturi Technologies, Inc. dated October 19, 1999(5)
10.65 Agreement for Purchase and Sale of Assets between MPI of
Arizona, an Arizona general partnership, and Venturi
Technologies, Inc. dated November 15, 1999(6)
10.66 Agreement for Purchase and Sale of Assets between MPI of
Northern Florida, a Colorado general partnership, and Venturi
Technologies, Inc. dated December 13, 1999(7)
10.67 Agreement for Purchase and Sale of Assets between Jon T.
Freeberg and Bridget E. Freeberg, dba Kentuckiana's Best
Cleaning Co., and Venturi Technologies, Inc. dated November 8,
1999
10.68 Stock Purchase Agreement between Jeffery L. Leavitt as Seller
and Venturi Technologies, Inc. as Purchaser regarding
J.L.L.C., Inc., dba Leavitt Restoration Services, dated as of
September 30, 1999
10.69 Stock Purchase Agreement between Mitchell J. Martin and Lloyd
Peterman as Sellers and Venturi Technologies, Inc. as
Purchaser regarding All Fours Distributing, Inc., executed on
March 31, 2000, effective February 1, 2000
10.70 Stock Purchase Agreement between Mitchell J. Martin and Lloyd
Peterman as Sellers and Venturi Technologies, Inc. as
Purchaser regarding MPI of Colorado, Inc., formerly known as
Martin & Peterman, Inc., executed on March 31, 2000, effective
February 1, 2000
10.71 Stock Purchase Agreement between Mitchell J. Martin and Lloyd
Peterman as Sellers and Venturi Technologies, Inc. as
Purchaser regarding MPI of Florida, Inc., executed on March
31, 2000, effective February 1, 2000
10.72 Stock Purchase Agreement between Mitchell J. Martin and Lloyd
Peterman as Sellers and Venturi Technologies, Inc. as
Purchaser regarding MPI of Oregon, Inc., executed on March 31,
2000, effective February 1, 2000
10.73 Agreement for Purchase and Sale of Percentage Interest in
Partnership between McNamara Enterprises, Inc. as Seller and
Venturi Technologies, Inc. as Purchase regarding MPI of
Georgia, executed on March 31, 2000, effective February 1,
2000
10.74 Agreement for Purchase and Sale of Percentage Interest in
Partnership between Eikov Enterprises, Inc. as Seller and
Venturi Technologies, Inc. as Purchase regarding MPI of
Southern Florida, executed on March 31, 2000, effective
February 1, 2000
10.75 Agreement for Purchase and Sale of Percentage Interest in
Partnership between Delabarre Enterprises, Inc. as Seller and
Venturi Technologies, Inc. as Purchase regarding MPI of
Washington, executed on March 31, 2000, effective February 1,
2000
27.0 Financial Data Schedule
</TABLE>
- ------------
(1) Incorporated by reference from Registration Statement on Form SB-2, as
filed on August 3, 1998.
(2) Incorporated by reference from Amendment No. 1 to Registration Statement
on Form SB-2, as filed on October 19, 1998.
(3) Incorporated by reference from Quarterly Report on Form 10-QSB for
quarter ended March 31, 1999, as filed on May 15, 1999.
(4) Incorporated by reference from Quarterly Report on Form 10-QSB for
quarter ended June 30, 1999, as filed on August 16, 1999.
(5) Incorporated by reference from Current Report on Form 8-K dated October
19, 1999.
(6) Incorporated by reference from Current Report on Form 8-K dated November
15, 1999.
(7) Incorporated by reference from Current Report on Form 8-K dated December
15, 1999.
25
<PAGE>
(b) REPORTS ON FORM 8-K
(i) Current Report on Form 8-K dated October 19, 1999
regarding the agreement to acquire the related MPI
entities and regarding the closing of the acquisition
of MPI of Nevada and 593693 B.C. LTD (Sunburst Carpet
Care).
(ii) Current Report on Form 8-K dated November 15, 1999
regarding the acquisition of MPI of Arizona.
(iii) Current Report on Form 8-K dated December 15, 1999
regarding the acquisition of MPI of Northern Florida.
26
<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: April 14, 2000 By: /s/ Michael F. Dougherty
--------------------------------
Michael F. Dougherty
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed by the following persons in counterpart on behalf of the
Company on the dates indicated.
SIGNATURE TITLE DATE
/s/ Michael F. Dougherty Chief Executive Officer April 14, 2000
- ------------------------ and Director (Principal
Michael F. Dougherty Executive Officer)
/s/ John M. Hopkins President and Director April 14, 2000
- ------------------------
John M. Hopkins
/s/ Gaylord M. Karren Director April 14, 2000
- ------------------------
Gaylord M. Karren
/s/ Mitchell J. Martin Director April 14, 2000
- ------------------------
Mitchell J. Martin
/s/ Stephen S. Abate Chief Financial Officer April 14, 2000
- ------------------------ (Financial and Accounting
Stephen S. Abate Officer)
/s/ Randy K. Johnson Secretary and General Counsel April 14, 2000
- ------------------------
Randy K. Johnson
27
<PAGE>
VENTURI TECHNOLOGIES, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheets...........................................................2
Consolidated Statements of Operations.................................................3
Consolidated Statements of Stockholders' Equity ......................................4
Consolidated Statements of Cash Flows.................................................6
Notes to Consolidated Financial Statements............................................7
</TABLE>
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Venturi Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Venturi
Technologies, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Venturi Technologies, Inc. as of December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for the years
ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
[LOGO]
March 31, 2000
1
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 242,786 $ 266,931
Accounts receivable, net of allowance of $120,000 in 1999
and $27,000 in 1998 971,883 548,449
Note Receivable - related party - Note E 40,024 40,024
Other current assets 185,094 2,392
------------ ------------
Total current assets 1,439,787 857,796
Fixed assets - Note C
Capital lease equipment 6,665,047 1,877,359
Machinery and equipment 1,339,365 711,148
Computer and office equipment 366,952 124,464
Automobiles and trucks 982,158 1,077,938
Buildings - 139,000
Land - 20,000
------------ ------------
Total fixed assets 9,353,522 3,949,909
Less accumulated depreciation (2,389,269) (1,638,300)
------------ ------------
Net fixed assets 6,964,253 2,311,609
Deferred tax asset, net of valuation allowance of
$2,718,768 in 1999 and $837,000 in 1998 - Note G 3,648,000 3,182,162
Goodwill, net of amortization of $2,877 502,362 -
Lease and rent deposits 264,285 115,133
------------ ------------
Total assets $ 12,818,687 $ 6,466,700
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,403,333 $ 1,649,394
Accrued liabilities - Note J 1,493,065 811,970
Commercial Finance Group - Note B - 295,239
Notes payable to stockholders - Note B 58,176 225,202
Current portion long-term debt and capital leases-Note C 1,580,488 822,113
------------ ------------
Total current liabilities 4,535,062 3,803,918
Long-term liabilities - Note C
Notes payable - stockholders 617,148 316,264
Capital lease obligations, net of unamortized discount 4,675,838 338,253
Notes payable to banks and vehicle finance companies 101,793 176,380
Notes payable - other 23,272 49,787
------------ ------------
Total long-term liabilities 5,418,051 880,684
Commitments and contingencies - Note I - -
Stockholders' equity - Note D
Preferred stock, -Series A through E, $.001 par value,
cumulative, convertible, 5,000,000 shares authorized,
3,163,993 and 877,255 shares issued and outstanding in 1999 and
1998, respectively 3,163 877
Common stock, $.001 par value, 20,000,000 shares authorized,
11,266,418 shares issued and 11,263,718 outstanding in 1999, and
5,837,361 shares issued and outstanding in 1998 11,267 5,837
Additional Paid-in capital 19,375,728 9,698,963
Common shares held in treasury (11,891) -
Retained earnings (deficit) (16,512,693) (7,923,579)
------------ ------------
Total stockholders' equity 2,865,574 1,782,098
------------ ------------
Total liabilities and stockholders' equity $ 12,818,687 $ 6,466,700
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE>
VENTURI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
1999 1998
------------- --------------
(Restated-Note A)
<S> <C> <C>
Revenues:
Carpet cleaning and restoration $ 9,956,218 $ 6,290,886
Expenses:
Carpet cleaning and restoration costs 5,577,693 3,884,475
Advertising 844,946 575,583
Other selling, general & administrative 9,392,218 6,590,241
Depreciation and amortization 858,549 494,057
------------ ------------
Total expenses 16,673,406 11,544,356
------------ ------------
Net (loss) from operations (6,717,188) (5,253,470)
Other income and expense:
Interest expense and amortization of debt discount (1,571,602) (854,941)
Interest income - 6,189
Gain on sale of assets 121,169 38,261
Impairment losses (822,921) -
------------ ------------
(2,273,354) (810,491)
Net (loss) before income tax benefit (8,990,542) (6,063,961)
Income tax benefit 465,838 3,182,162
------------ ------------
Net (loss) $ (8,524,704) $ 2,881,799)
============ =============
Per share amounts (basic and diluted):
Net loss from operations before
income tax benefit $ (1.02) $ (1.28)
Income tax benefit $ .05 .66
------------ ------------
Net (loss) $ (.97) $ (.62)
============ ============
Weighted average shares used in computing
per share amounts 8,730,304 4,796,554
============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Common Stock (Series A through E) Subscription
SHARES AMOUNT SHARES AMOUNT Receivable
------------ ------------ ------------------------ ------------
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1998 4,542,753 $ 4,542 269,410 $ 269 $ (870,000)
Common stock issued
for cash 908,468 908
Compensatory stock
options at fair value
- Note D
Common stock issued
in lieu of interest 21,600 22
Common stock issued
for consulting services,
fees and wages 155,720 156
Common stock issued
upon conversion of
warrants 208,820 209
Proceeds received for
preferred shares
subscribed 870,000
Series B preferred stock
issued for cash 47,747 48
Series B preferred stock
issued for fees 7,253 7
Series A preferred stock
dividends paid or
accrued
Series C preferred stock
issued for cash 480,975 481
Series C preferred stock
issued for fees 71,870 72
Warrants issued with
lease line
Warrants issued for
legal and consulting
fees at fair value
Normal pre-pooling
distributions made
to shareholders of
acquired entities
Net loss ----------- ------------- ------- ------------ ------------
Balances at
December 31, 1998 5,837,361 $ 5,837 877,255 $ 877 $ -
=========== ============= ======= ============ ============
<CAPTION>
Additional Retained
Paid-in Earnings
Capital (DEFICIT) TOTAL
--------------------------------------------------
<S> <C> <C> <C>
Balances at
January 1, 1998 $ 4,421,161 $(4,520,878) $ (964,906)
Common stock issued
for cash 421,097 422,005
Compensatory stock
options at fair value
- Note D 767,920 767,920
Common stock issued
in lieu of interest 75,578 75,600
Common stock issued
for consulting services,
fees and wages 544,844 545,000
Common stock issued
upon conversion of
warrants 104,201 104,410
Proceeds received for
preferred shares
subscribed 870,000
Series B preferred stock
issued for cash 879,897 879,945
Series B preferred stock
issued for fees 145,048 145,055
Series A preferred stock
dividends paid or
accrued (64,410) (64,410)
Series C preferred stock
issued for cash 985,519 986,000
Series C preferred stock
issued for fees 147,262 147,334
Warrants issued with
lease line 1,137,750 1,137,750
Warrants issued for
legal and consulting
fees at fair value 68,686 68,686
Normal pre-pooling
distributions made
to shareholders of
acquired entities (456,492) (456,492)
Net loss (2,881,799) (2,881,799)
-------------- ------------- -----------
Balances at
December 31, 1998 $ 9,698,963 $ (7,923,579) $1,782,098
============== ============= ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS= EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Preferred Stock
Common Stock (Series A through E) Treasury Stock
Shares Amount Shares Amount Shares Amount
------------ ------ ---------- ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1999 5,837,361 $ 5,837 877,255 $ 877 - $ -
Common stock
issued for cash 4,901,735 4,902 - - - -
Common stock for
consulting services
& fees 146,886 147 - - - -
Common stock issued
for acquisitions under
purchase method of
accounting 250,436 251 - - - -
Common stock issued
for payment of long-
term debt 20,000 20 - - - -
Common stock issued
for conversion of
Series B preferred
stock 110,000 110 (22,000) (22) - -
Preferred stock issued
for cash (Series D
and E) - - 2,308,738 2,308 - -
Preferred stock
dividends paid or
accrued - - - - - -
Compensatory stock
options at fair market
value - Note D - - - - - -
Warrants issued for
lease line - - - - - -
Warrants issued for
consulting services
and fees - - - - - -
Shares purchased into
treasury - - - - (2,700) (11,891)
Net loss - - - - - -
---------- ---------- ---------- -------- -------- ---------
Balance at
December 31, 1999 11,266,418 $11,267 3,163,993 $3,163 (2,700) $(11,891)
========== ========== ========== ======== ======== =========
<CAPTION>
Additional Retained
Paid-in Earnings
Capital (deficit) Total
----------------------------------------
<S> <C> <C> <C>
Balances at
January 1, 1999 $ 9,698,963 $(7,9923,579) $1,782,098
Common stock
issued for cash 4,037,008 - 4,041,910
Common stock for
consulting services
& fees 195,359 - 195,506
Common stock issued
for acquisitions under
purchase method of
accounting 630,464 - 630,715
Common stock issued
for payment of long-
term debt 39,980 - 40,000
Common stock issued
for conversion of
Series B preferred
stock (88) - -
Preferred stock issued
for cash (Series D
and E) 3,257,692 - 3,260,000
Preferred stock
dividends paid or
accrued - (64,410) (64,410)
Compensatory stock
options at fair market
value - Note D 604,000 - 604,000
Warrants issued for
lease line 474,350 - 474,350
Warrants issued for
consulting services
and fees 438,000 - 438,000
Shares purchased into
treasury - - (11,891)
Net loss - (8,524,704) (8,524,704)
------------ -------------- ----------
Balance at
December 31, 1999 $19,375,728 $(16,512,693) $2,865,574
============ ============== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
1999 1998
------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (Restated - Note A)
Net loss (8,524,704) $(2,881,799)
Adjustments to reconcile net loss to net cash used in operating activities:
(Gain) loss on disposal of property (121,169) 38,261
Provision for allowance on accounts receivable 638,759 -
Preferred stock issued for services and fees - 292,389
Common stock issued in lieu of wages, rent, interest, and fees 195,506 725,010
Compensatory options and warrants 1,042,000 836,606
Depreciation and amortization 858,549 494,057
Amortization of debt discount 836,000 466,562
Impairment losses 822,921 -
Changes in operating assets and liabilities:
Accounts receivable (870,118) (425,910)
Other current assets (152,538) 21,101
Lease and rent deposits (149,152) (115,133)
Accounts payable and accrued liabilities 103,641 1,711,520
Checks drawn in excess of bank balance - (28,950)
Deferred taxes, net of valuation allowance (465,838) (3,182,162)
---------- -----------
NET CASH USED IN OPERATING ACTIVITIES (5,786,143) (2,048,448)
CASH FLOWS FROM INVESTING ACTIVITIES
Note receivable - related party - (40,024)
Purchases of equipment and other fixed assets (165,580) (274,599)
Proceeds from the sale of fixed assets 266,261 120,250
Acquisitions, net of cash acquired (337,015) -
--------- -----------
NET CASH USED IN INVESTING ACTIVITIES (236,334) (194,373)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from bank line-of-credit (295,239) (29,804)
Proceeds from notes payable to stockholders - 65,600
Payments on notes payable and capital lease obligations (753,951) (486,681)
Payments on notes payable to stockholders (226,769) (261,117)
Issuances of common stock for cash 4,041,910 422,005
Issuances of preferred stock for cash 3,260,000 1,865,945
Purchase of treasury stock (11,891) -
Proceeds from preferred stock subscribed - 870,000
Payment of cash dividends on preferred stock (15,728) (25,110)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,998,332 2,420,838
----------- -----------
NET INCREASE (DECREASE) IN CASH (24,145) 178,017
Cash at Beginning of Year 266,931 88,914
----------- ----------
CASH AT END OF YEAR $ 242,786 $ 266,931
=========== ===========
Supplemental disclosures - Cash interest paid $ 735,602 $ 327,714
Schedule of non-cash investing and financing activities:
Warrants issued for lease line - unamortized debt discount $ 474,350 $ 1,137,750
Notes payable and capital lease obligations entered into
to acquire equipment and other fixed assets $ 5,376,739 $ 1,426,437
Preferred stock dividends accrued but not paid $ 48,682 $ 39,300
Notes payable paid with common stock $ 40,000 -
With acquisitions described in Note A, liabilities were assumed as follows:
Fair value of assets acquired $ 1,688,597 -
Stock and paid-in-capital 630,715 -
Cash paid 367,000 -
----------- -----------
Liabilities assumed or incurred in acquisition
$ 690,882 $ -
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
The summary of significant accounting policies of Venturi Technologies, Inc.
(the Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation
of the financial statements.
BUSINESS ACTIVITY
Venturi was organized and began business in 1992 to provide carpet cleaning
and restoration services. The Company's consolidated financial statements
include the operations of Venturi Technologies, Inc. and its wholly owned
operating subsidiary, Venturi Technologies, Inc., a Texas corporation. All
inter-company transactions have been eliminated in consolidation. Venturi has
obtained its growth through a series of mergers with companies engaged in
substantially the same business.
The names of the entities combined with Venturi during 1998 and the dates
combined are as follows (all entities combined are engaged in carpet cleaning
and flood damage restoration):
- Complete Carpet Service - a sole proprietorship located in Dallas,
Texas. The acquisition took place in April, 1998.
- Pro Tech Carpet Cleaning and Flood Restoration - a partnership
located in Riverton, Utah. The acquisition took place in March,
1998.
- Disaster Plus Corporation - an S-corporation located in Lindon,
Utah. The acquisition took place in October, 1998.
- Dirt Free Carpet Cleaning and Upholstery, Inc. - an S-corporation
located in Houston, Texas. The acquisition took place in
September, 1998.
- All Valley Carpet and Upholstery - a sole proprietorship located
in Lancaster, California. The acquisition took place in June,
1998.
- Top Gun Carpet Cleaning, Inc. - an S-corporation located in Santa
Rosa, California. The acquisition took place in October, 1998.
- Flohr, Inc. doing business as Magic Touch Carpet and Furniture
Cleaning - an S-corporation located in Midvale, Utah. The
acquisition took place in December, 1998.
A total of 87,632 shares of $.001 par value common stock were issued in
connection with the 1998 combinations.
Results of operations of the previously separate enterprises for the period
prior to the mergers are summarized as follows:
<TABLE>
<CAPTION>
1998
---------------
<S> <C>
Revenues $ 2,414,898
Net Income $ 295,641
Pre-combination distributions $ 456,492
</TABLE>
These mergers have been treated as pooling-of-interest business combinations
wherein the operating results of each combined entity have been included in the
financial statements as though the enterprises had been
7
<PAGE>
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)
combined as of the beginning of each year presented. The combined enterprise
has recorded assets and liabilities in conformity with generally accepted
accounting principles. Accordingly, 1998 revenues and expenses have been
restated to reflect results of the combined entities as if the combinations
had occurred at January 1, 1998. Expenses related to the mergers have been
deducted from resulting net income.
There were no adjustments to net assets of any of the combined enterprises to
comply with or adopt the same accounting principles or the same fiscal years.
Under the pooling-of-interests method of accounting the retained earning
accounts of all enterprises have been combined.
The names of the entities combined with Venturi during 1999 and the dates
combined are as follows (all entities combined are engaged in carpet cleaning
and flood damage restoration):
- Kentuckiana's Best Cleaning Co. and Kentucky's Best Cleaning Co.
(Kentucky) are proprietorships located in Louisville and Lexington,
Kentucky. The acquisitions took place in November, 1999 with a purchase
price of $701,090.
- J.L.L.C. Inc., a Utah corporation. The acquisition took place in
September, 1999, with a purchase price of $139,824.
- 593693 BC, LTD (Vancouver), a British Columbia corporation. The
acquisition took place in October, 1999, with a purchase price of
$50,000.
- MPI of Nevada, a Colorado general partnership. The acquisition took
place in October, 1999, with a purchase price of $100,000.
- MPI of Northern Florida, a Colorado general partnership. The
acquisition took place in December, 1999, with a purchase price of
$85,000.
- MPI of Arizona, an Arizona general partnership. The acquisition took
place in November, 1999, with a purchase price of $400,000.
A total of 250,436 shares of $.001 par value common stock were issued with the
1999 combinations. Additional consideration given was $367,000 in cash and
$389,324 in notes payable.
All companies acquired have been accounted for as purchases with the excess of
the purchase price over the estimated fair value of the net assets acquired
recorded as goodwill. Goodwill in the amount of $1,159,703 was recorded as a
result of the 1999 acquisitions. The results of each operation have been
included in the consolidated financial results of the Company from the date of
acquisition.
The following unaudited pro forma data summarize the results of operations for
the periods indicated as if the 1999 acquisitions had been completed as of the
beginning of the periods presented. The pro forma data gives effect to actual
operating results prior to the acquisition, adjusted to include the pro forma
effect of interest expense, amortization of intangibles and income taxes. These
pro forma amounts do not purport to be indicative of the results that would have
actually been obtained if the acquisition occurred as of the beginning of the
periods presented or that may be obtained in the future.
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998
------------- ------------
<S> <C> <C>
Revenues $ 13,029,083 $ 8,774,114
Net Income $ (8,354,225) $ (2,769,886)
Earnings per share $ (.95) $ (.56)
</TABLE>
8
<PAGE>
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)
REVENUE RECOGNITION
The Company records revenues as services are performed and as the customer is
billed or payment received. Refunds and allowances are not material.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments with a maturity
of three months or less to be cash equivalents.
FIXED ASSETS
Depreciable fixed assets are stated at cost and depreciated using the
straight-line method based on estimated useful lives. Amortization of assets
under capital leases has been included in depreciation expense.
ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets and liabilities, and the reported amounts of
revenues and expenses, as well as footnote disclosures included in the financial
statements. Significant estimates relating to debt issuance costs (see note D),
allowances for bad debts, income taxes (see note G), and compensatory stock
options (see Note D) have been included in the financial statements. Actual
amounts could differ from those reported.
ADVERTISING COSTS
The Company expenses the costs of advertising as incurred. Advertising expenses
aggregated $844,946, in 1999, and $575,583 in 1998.
TAXES BASED ON INCOME
The Company accounts for income taxes using the asset and liability method. This
approach requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of other assets and liabilities.
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during the periods presented. A reconciliation of factors
entering into the computation of basic versus diluted earnings per-share is not
necessary due to the anti-dilutive effect of any potential common shares on net
loss per share.
LONG-LIVED ASSETS
The Company periodically reviews the recorded value of its long-lived assets to
determine if the future cash flows to be derived from those assets will be
sufficient to recover the remaining recorded asset values. During 1999, the
Company recorded impairment losses of $822,921 associated with goodwill and
fixed assets of Kentucky and Vancouver. An impairment was recognized when the
future undiscounted cash flow of these
9
<PAGE>
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)
cleaning entities acquired in 1999 were estimated to be insufficient to recover
the goodwill associated with the acquisition of those entities. Also, certain
fixed assets were deemed to have estimated realizable values lower than their
carrying values. Accordingly, these assets were written down to an estimate of
their fair values. Considerable management judgement is necessary to estimate
fair value. As a result, actual results could vary significantly from
management's estimates.
There were no impairment losses recorded in 1998.
STOCK OPTIONS
The Company values stock options based on an option-pricing model and recognizes
this value as an expense over the period in which the options vest. In addition,
the Company makes certain other disclosures regarding pro-forma net loss and net
loss per share amounts using the fair value method of valuing compensatory stock
options and warrants. The Company has also recorded various other expenses
related to the issuance of warrants and options to non-employees using the fair
value method.
INTANGIBLE ASSETS
Intangible assets, primarily goodwill resulting from business acquisitions, are
amortized on a straight line basis over their estimated useful lives of fifteen
years.
CREDIT RISK
The Company's customers include individuals and companies that may be affected
by changing economic conditions.
In 1998, the Company settled obligations with a factoring company and entered
into a new financing agreement with the same company to "sell" accounts
receivable. Under the new agreement, the Company received a specified funding
amount under a $300,000 line of credit arrangement based on "eligible accounts
receivable" which was determined by the financing company once the monthly aging
was submitted. The line of credit used the receivables as collateral and the
financing company was permitted to collect on the receivables directly as
needed, to maintain adequate "loan to value". Annual interest was compounded
daily at 12% (see note B). In addition, the financing company held out
commissions and other fees from the monthly proceeds. This agreement was
terminated and settled during 1999, and an agreement was entered into with a
different company. The new agreement provided a choice of which accounts
receivable would be sold. The factoring company advanced 75% of the gross amount
on each account, and earned 3.25% plus .10833% each day after 30 days the
invoice remained unpaid. A fee of .5% was paid for each invoice Venturi chose
not to sell. This agreement was terminated and settled in January 2000
subsequent to year-end. The Company feels it has adequately reserved for
doubtful accounts receivable.
The Company does not routinely maintain cash balances at banking institutions in
excess of federally insured amounts. In addition, the Company's customers are
made up of many very small accounts which are spread throughout the country and
are not confined to any one particular region.
RECLASSIFICATION
Certain 1998 amounts have been reclassified to conform with the 1999
presentation.
10
<PAGE>
B. NOTES PAYABLE
Short-term notes payable and the carrying value of collateral at December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Net Carrying Value
of Collateral at Note Balance at
December 31 December 31
--------------------------- --------------------------
1999 1998 1999 1998
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Notes payable to shareholders, no stated
interest, due on demand, unsecured $ 0 $ 0 $ 58,176 $ 225,202
Line-of-credit - $300,000 limit, 12%
stated interest rate excluding fees,
secured by accounts receivable. 0 548,449 0 295,239
------------- ------------- ------------- ------------
$ 0 $ 548,449 $ 58,176 $ 520,441
============= ============= ============= ============
</TABLE>
The weighted average interest rates for short-term notes during 1999 and 1998
were 7.72% and 8.45% and at year-end were 0% and 7.72%, respectively. The
maximum amounts outstanding at any month end were $520,441 and $581,529 and
the weighted average amounts outstanding were $436,928 and $401,499,
respectively.
C. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
Net Carrying Value
of Collateral at Note Balance at
December 31 December 31
----------------------- --------------------------
1999 1998 1999 1998
--------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Notespayable to shareholders, interest from 9.4% to
17.11%, monthly payments of $300 to $2,500,
unsecured, due dates - 1999 through March 2027. $ 0 $ 0 $ 1,031,955 $ 471,209
Notes payable to banks, interest ranging from 10%
to 12%, due dates ranging from 1999 to 2004,
monthly payments ranging from $370 to $850,
secured by vehicles, equipment and real estate. 904,357 324,303 369,648 142,445
Notes payable to vehicle finance companies, interest
ranging from 3.9% to 10% per annum, payments
from $230 to $686 per month, due dates - 1999
to 2004, secured by vehicles. 197,942 339,010 43,836 170,595
Notes payable to individuals, interest at 12% per
annum, payment at $677 per month, due 2011,
collateralized by real estate. 0 56,095 29,090 52,031
Note payable to bank, guaranteed by the Small
Business Administration, 11.25% per annum,
monthly payments of $1,298, collateralized by
certain buildings and equipment, due 2012. 0 168,552 0 33,779
</TABLE>
11
<PAGE>
C. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
<TABLE>
<CAPTION>
Net Carrying Value
of Collateral at Note Balance at
December 31 December 31
------------------------ -----------------------------
1999 1998 1999 1998
----------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Capital lease obligations for vehicles, effective
interest of 12% to 35.29% per annum, monthly
payments from $361 to $17,600, lease terms
of 24 to 84 months, ending in 2007 (Note I). $ 5,795,397 $1,474,103 $ 5,813,306 $ 1,483,440
Unamortized debt discount arising from the issuance
of detachable warrants with capital leases
(see Note D), amortized over the remaining
lives of the obligations remaining - - (289,296) (650,702)
------------- ------------ -------------- ------------
Less current portion - - $ (1,580,488) $ (822,113)
------------- ------------- -------------- ------------
$ 6,897,696 $ 2,362,063 $ 5,418,051 $ 880,684
============= ============ ============== ============
</TABLE>
Future minimum lease payments of capital lease obligations for the five years
succeeding December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $ 969,461
2001 963,076
2002 965,316
2003 891,220
2004 871,762
Thereafter 1,854,463
--------------
6,515,273
Less amount representing
interest (701,967)
--------------
$ 5,813,306
==============
</TABLE>
Maturities of long-term debt (excluding capital leases) for the five years
succeeding December 31, 1999 are $732,322 in 2000, $191,961 in 2001, $187,148
in 2002, $151,742 in 2003, and $211,358 thereafter.
D. SHAREHOLDERS' EQUITY
The Company has reserved 2,000,000 shares of common stock for adoption of a
combined incentive and non-qualified (dual) stock option plan for its
employees. The options bear vesting terms from immediate to one year from
date of grant and expire within 10 years of the date of grant. No incentive
options were granted or exercised in 1999 or 1998. In 1999, 13,750 incentive
options were canceled. In June 1998, the Company granted 208,000
non-qualified options (outside of the plan) to executive officers with
immediate vesting, exercisable for up to ten years at $.01 per share. The
Company recorded compensation expense of $725,910 in 1998 using the fair
value method of valuing options as required under SFAS 123 (FAS 123)--
Accounting for Stock Based Compensation. An additional 200,000 non-qualified
options were granted to executive officers in 1999 at a strike price of $2.40
per share, exercisable in 2004.
12
<PAGE>
D. SHAREHOLDERS' EQUITY (CONTINUED)
Compensation of $38,000 was recorded for these options. Also, 200,000
non-qualified options at $.01 per share, exercisable in 2009 were granted in
1999 resulting in compensation of $566,000.
During 1999, the Company adopted a non-qualified stock purchase plan whereby all
employees desiring to participate may elect to have after-tax amounts withheld
to purchase company shares on the open market. Because the shares purchased
under the plan were at fair value with the participants' after tax
contributions, no compensation expense was recorded during 1999 and all shares
vested immediately. The employer may make contributions to the participants'
account at its discretion, of up to 10% of the employees contribution. The
Company made no employer contributions to the plan to purchase shares allocable
to participants during 1999.
The Company has issued other common stock options and warrants throughout 1999
and 1998 for various services and benefits which were considered compensatory.
The number of options and warrants granted, as well as types and amounts of
services and costs incurred are as follows:
- Combustion Resources - 20,000 options granted in 1998,
exercisable at $2.40 per share through June of 2001. Research and
development expenses of $42,000 equal to the computed fair value
of the options were recorded. No other research expenses were
incurred in 1998.
- Capital Partners - 18,274 warrants issued in 1998 exercisable at
$2.50 per share through July of 2001. Consulting expenses of
$14,436 was recorded for the fair value of the warrants.
- Meyer Hendricks - 175,000 warrants issued in 1998 exercisable at
$2.50 per share through November of 2001. Legal fees of $54,250
were recorded for the fair value of the warrants.
- Franklin Funding (Franklin) and Northstar Capital - 388,820
warrants issued in 1998 exercisable at $.50 per share and 25,000
warrants exercisable at $2.00 per share through February 2008.
The warrants were issued as part of the Company's vehicle lease
line commitment for $3,000,000 (see note C). Accordingly, the
value of the warrants totaling $1,138,000 was recorded as debt
discount and offset against the underlying liability in
accordance with Accounting Principles Board (APB) 14 -
"Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants". Approximately $466,000 was expensed in 1998
related to amortization of the debt discount. In 1999, an
additional 225,000 warrants exercisable through August, 2009 with
a strike price of $3.00 per share were issued under a new master
vehicle lease agreement with Franklin. Accordingly, an additional
$474,350 unamortized debt discount was recorded in 1999. In
March, 2000, the Company negotiated a new lease for all of the
existing equipment which provided for a reduced implicit rate and
provided other more favorable terms. As a condition for
terminating the old leases, the Company issued common shares
under warrant with Franklin for no additional consideration.
Accordingly, the Company has accelerated the debt discount
amortization in 1999 to account for the termination of the leases
in March, 2000. The total debt discount amortization expensed in
1999 was $836,000. Debt discount amortization is included in
other selling, general and administrative expenses in the
combined statements of operations. At December 31, 1999, the
Company had $289,296 of unamortized debt discount remaining (see
Note C). The remaining debt discount has been adjusted for the
difference between actual value of the common shares issued and
the original value recorded upon issuance of the warrants.
13
<PAGE>
D. SHAREHOLDERS' EQUITY (CONTINUED)
- Bluestone Capital Partners, et al - 600,000 warrants issued in
1999 exercisable at $2.25 per share through October, 2002 for
engagement fees, consulting and other services related to raising
capital. These costs are not associated with proceeds from any
specific source of funding. Accordingly, the Company has recorded
consulting and finders fees of $438,000.
Other compensatory non qualified options totaling 620,462 were granted to
officers and employees in 1999, at strike prices ranging form $1.00 per share to
$2.40 per share exercisable in five to ten years. These options vest in 2000
through 2003 and, therefore, no compensation was recorded for these options in
1999. Management estimates these options have a fair value of approximately
$274,000.
As permitted by FAS 123, the Company used the Black-Scholls method of computing
the fair value of options and warrants at the date of grant. The weighted
average risk-free interest rate used to estimate the fair value ranged from
5.01% to 5.15% with no expected dividends. Stock prices for sixty-one different
dates ranging both before and after grant dates were used in measuring
volatility.
The number and weighted average exercise prices per share for the following
groups of compensatory options as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------------------- ---------------------------------
Weighted Average Weighted Average
Number Exercise Price Number Exercise Price
------------------ ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 1,728,332 $ 1.52 870,007 $ 1.30
Options granted during the year 1,020,462 $ 1.90 858,325 $ 1.75
Options exercised during the year - $ - - $ -
Options forfeited during the year (23,750) $ 2.86 - $ -
---------- ---------
Options outstanding at end of year 2,725,044 $ 1.67 1,728,332 $ 1.52
========== =========
Options exercisable at end of year 2,028,332 $ 1.42 1,728,332 $ 1.52
========= =========
</TABLE>
The weighted averages per share fair value of the following groups of options
for 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Options with exercise prices exceeding fair
value at date of grant $ .38 None
Options with exercise prices equaling fair
value at date of grant $ 1.53 None
Options with exercise prices lower than fair
value at date of grant $ 2.70 $ 3.37
</TABLE>
Other non-compensatory warrants were issued in 1999 for the purchase of 251,000
shares of common stock at prices ranging from $2.44 to $2.51 per share. Total
warrants outstanding at December 31, 1999 and 1998 were 2,033,575 and 957,575,
respectively. The Company granted a total of 1,076,000 common stock warrants
during 1999 and 1,166,395 in 1998 with a weighted average grant date fair value
of $.61 per share and $2.97 per share, respectively.
14
<PAGE>
D. SHAREHOLDERS' EQUITY (CONTINUED)
As of December 31, 1997, the Company had issued 64,410 shares of 10%, $.001 par
value, cumulative, convertible Series A Preferred Stock as part of a 150,000
share offering at $10.00 per share. The preferred shares are convertible at any
time to common stock at a rate of one to 1.093585771. The preferred shares carry
voting rights. The shares carry liquidation preferences at $10.00 per share plus
an amount equal to all accumulated and unpaid dividends. Such redemption price
shall, at the option of the holder of the shares, either be paid in cash or in
common stock at a conversion rate of 1.093585771 of common stock for each share
of Series A Preferred Stock. Holders of the Series A Preferred Stock are
entitled to receive, when declared by the Board of Directors, cumulative cash
dividends of $1.00 per share annually, in priority to common stock dividends.
The Company declared cash dividends for the Series A preferred shareholders of
$64,410 in 1999 and 1998. These dividends have been included in the loss
available to shareholders in computing basic earnings per share. During 1999 and
1998, the Company paid dividends of $15,728 and $25,110, respectively. At
December 31, 1999, the Company was obligated for preferred stock dividends in
arrears totaling $105,901. Accordingly, these amounts were used in arriving at
income available to common shareholders in computing earnings per share. The
Company has the option to call the Series A Preferred Stock for redemption at
any time at a redemption price of $11.00 per share plus any unpaid dividends.
The redemption may be paid in cash or converted to common stock at a conversion
rate of one share of common stock for each share of preferred stock, at the
option of the holder. Each share of preferred stock includes a warrant to
acquire one share of common stock for $5.00 exercisable before June, 2002.
In December 1997, the Company commenced a private placement of 300,000 shares of
6% Series B, cumulative, convertible Preferred Stock (315,000 shares authorized)
to Entrepreneurial Investors, Ltd. (EIL). The placement took place as follows:
- Phase I for 200,000 shares at $5.00 per share on or before
December 31, 1997.
- Phase II for 50,000 shares at $20.00 per share on or before March
31, 1998.
- Phase III for 50,000 shares at $20.00 per share did not occur in
1998 as planned. The Company has sought and obtained other
sources of funding to replace this funding.
The shares bear rights to a cumulative dividend of 6% per annum when and if
declared by the board of directors payable on a quarterly basis with shares of
common stock based on the 30-day average closing bid price of the common stock
prior to the declared dividend date. As of December 31, 1999 and 1998, the
Company had not declared or paid any Series B preferred dividends. Each share of
preferred stock is convertible into five shares of common stock. The shares
carry liquidation preferences of $10.00 per share plus all accumulated and
unpaid dividends. Under phases I and II of the offering, the Company received a
total of $1,750,000 as consideration for issuing 250,000 shares of Series B
preferred stock, with $250,000 of the proceeds used to pay commissions, legal
fees and expenses of Equity Services, Ltd (ESL). In 1999, 22,000 of the
preferred shares were converted to 110,000 shares of common stock.
Concurrent with each phase of the offering, the Company issued 5,000 additional
preferred shares to ESL as additional payment of fees and expenses. In each of
1997 and 1998, 5000 shares were issued to ESL for these services which have been
charged to operations.
15
<PAGE>
D. SHAREHOLDERS' EQUITY (CONTINUED)
As part of the offering, the Company has agreed to grant 50,000 options to ESL,
to acquire common stock upon the completion of each phase of the offering at an
option price of $3.50 per share, exercisable in five years. In April, 1998, the
Company commenced a private placement for 1,609,756 shares of 6% Series C
cumulative, convertible, non-voting preferred stock at $2.05 per share for a
total of $3,300,000. The preferred stock bears the right to cumulative annual
dividends if and when declared by the Board of Directors, payable quarterly in
cash or in the equivalent number of restricted common shares of the Company (at
$2.05 share). The Series C preferred stock is convertible into common stock at
the rate of one share preferred to one share common. Consistent with the other
classes of preferred stock, the Series C preferred shares carry liquidation
rights equal to the issuance price of $2.05 per share plus accrued or unpaid
dividends.
As of December 31, 1998, the Company had raised a total of $1,133,334 for
552,845 shares issued. After payment of $147,334 in financial advisory fees and
"success" fees, the Company received net proceeds of $986,000. As of December
31, 1998, the Company granted 520,325 options for the purchase of additional
shares at $2.05 per share exercisable through December of 1999. In addition,
warrants for an additional 268,293 shares of common stock were issued at a
strike price of $2.05 per share exercisable through April, 2003. If the Series C
preferred shareholders exercise these options and warrants, they will be granted
warrants to acquire an additional 268,293 share of common stock at the $2.05 per
share strike price resulting in the total placement of 1,609,756 equivalent
common shares. As of December 31, 1999, no additional preferred shares were
issued under the agreement.
In April, 1999, the Company commenced a private placement for 2,303,738 shares
of Series D convertible, 8% cumulative voting preferred stock for $3,000,000
(less placement fees). The Series D preferred shares bear liquidation rights
equal to original issue price plus cumulative unpaid dividends. Dividends are
payable if and when declared by the board. No dividends were declared on Series
D preferred stock in 1999. The shares are redeemable at the greater of the
average closing price of an equivalent number of shares of the Company's common
stock at date of redemption, or its liquidation value. Each preferred share is
convertible into 2 shares of common stock.
In December, 1999, the Company commenced an offering of 20,000 shares of Series
E cumulative, convertible, voting and participating preferred stock for
$2,000,000 (less placement fees). The Series E preferred shares are convertible
at a conversion price equal to 80% of the average trading price of the Company's
stock for the 15 days prior to conversion. These shares bear liquidation rights
at original issue price plus cumulative dividends. Dividends are payable
regardless of whether or not declared starting in 2000, and may be paid in
additional shares of preferred stock at the discretion of the holder. The shares
may be redeemed at the Company's option, at 125% of liquidation value. In the
event of non-compliance with any one of several provisions of the agreements,
the holder may exercise any one of many remedies, including the immediate
redemption of shares at preferences greater than the 6% dividend rate or other
conversion privileges. As of December 31, 1999 the Company has sold 5,000 shares
of the Series E preferred stock raising a total of $500,000. Subsequent to
year-end, the Company completed the offering. Soon thereafter, all 20,000 shares
were converted into shares of common stock. As part of the offering, the Company
issued warrants for the purchase of common stock at a conversion price based on
the average 10 day trading price of the common stock prior to issuance. With the
first 5,000 shares issued, the Company granted 250,000 warrants, with additional
warrants to be issued in 2000 based on the above formula.
16
<PAGE>
D. SHAREHOLDERS' EQUITY (CONTINUED)
All preferred shares have a $.001 par value.
Treasury stock was purchased on the open market at fair market value and
recorded at the amount of repurchase rather than original issue price.
The Company has not declared, nor paid any common stock dividends for 1999 or
1998. The Company also did not declare nor pay any Series B or Series C
preferred dividends in 1999 or 1998. The options, warrants, and convertible
preferred stock instruments mentioned above are all securities potentially
dilutive in future periods and were not included in the computation of earnings
per share in 1999 and 1998 because they are considered anti-dilutive in periods
when the Company reports losses from continuing operations. Subsequent to
year-end, the Company has issued additional shares of common and preferred stock
(see Note H).
E. RELATED PARTY TRANSACTIONS
The Company has entered into several notes payable with officers and
shareholders of the Company. The amounts and terms of these notes are disclosed
in Note C.
At December 31, 1999 and 1998, the Company had accrued management fees to
certain officers and shareholders of the Company of $10,000 and $54,952,
respectively. The Company paid management fees of $256,444 in 1999 and $184,598
in 1998 to these officers or to entities owned principally by them. These fees
were for services rendered by the officers in lieu of wages and, in some cases,
the fees were paid to the same officers owed under notes payable outlined in
Note C. The Company has also performed minor carpet cleaning services for these
entities at prices commensurate with its pricing system for other customers.
In 1999 and 1998, the Company paid $10,767 and $45,745 respectively, in fees and
relocation expenses to an accounting firm which is owned by an officer and
shareholder of the Company.
The Company has loaned $40,024 to a company owned principally by two executive
officers and major shareholders of the Company. The note receivable bears
interest at 8% per annum and is payable upon demand.
During 1999 and 1998, the Company issued shares to various individuals and
entities who were existing shareholders for interest, wages, and consulting as
shown on the statement of shareholder's equity.
F. COMPANY OPERATIONS AND GOING CONCERN CONSIDERATIONS
As shown in the accompanying financial statements, the Company has incurred net
pre-tax losses of $8,990,542 for the year ended December 31, 1999 and $6,063,961
for the year ended December 31, 1998. As of December 31, 1999 the Company
reported an accumulated deficit of $16,512,693. However, management has
consistently shown the ability to raise capital through debt and equity
financing. Throughout 1998 and 1999, and since year-end, management has
continued to follow through on its plans to raise the necessary capital to fund
operations and repay its current obligations.
As discussed in Notes A and H, the Company acquired several carpet cleaning
companies and a damage restoration company during 1999, and has acquired
additional carpet cleaning companies subsequent to year-
17
<PAGE>
F. COMPANY OPERATIONS AND GOING CONCERN CONSIDERATIONS (CONTINUED)
end. Also, as discussed in Note H, the Company has entered into agreements to
obtain $3,500,000 in additional equity financing. The Company has also
renegotiated significant debt financing contracts and has ongoing negotiations
for further equity financing. The agreements in place and those currently being
negotiated are expected to fund operations and meet the Company's current
obligations through the end of 2000. The Company has significantly written off
or recorded impairment of assets obtained during 1999 to better reflect
management's estimate of the value of those assets. As a result of these
adjustments and the effects of other non-cash expenses, such as compensatory
stock awards, over $3,200,000 of the 1999 loss is from non-cash transactions.
Management believes the Company is now better positioned to move forward and
that the 1999 loss is not indicative of future performance. Consequently, in
spite of the Company's historical losses, management believes that significant
doubt about the Company's ability to continue as a going concern is mitigated.
G. INCOME TAXES
The Company recognizes the tax effects of transactions in the year in which such
transactions enter into the determination of net income, regardless of when
reported for tax purposes. Deferred taxes are provided in the financial
statements to give effect to the resulting temporary differences which arise
primarily for differences in accounting methods, the basis of fixed assets, and
depreciation methods based on the income taxes expected to be payable in future
years. Tax credits (if any) are accounted for by the flow-through method as a
reduction of the current income tax provision.
Income tax expense (benefit) for 1999 and 1998 consists of:
<TABLE>
<CAPTION>
1999 Current Deferred Total
- -------------- ------------- -------------- -----------------
<S> <C> <C> <C>
Federal $ - $ (390,462) $ (390,462)
State $ - $ (75,376) $ (75,376)
-------------- --------------- -----------------
Total $ - $ (465,838) $ (465,838)
============== ================ ==================
</TABLE>
<TABLE>
<CAPTION>
1998 Current Deferred Total
- -------------- ------------- -------------- -----------------
<S> <C> <C> <C>
Federal $ - $ (2,969,806) $ (2,969,806)
State $ - $ (212,356) $ (212,356)
-------------- --------------- -----------------
Total - $ (3,182,162) $ (3,182,162)
============== ================ ==================
</TABLE>
Components of deferred tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998
------------------ ------------------
<S> <C> <C>
Allowance for bad debts $ (35,340) -
Debt discount amortization (317,587) (168,263)
Stock based compensation (395,960) (313,727)
Net operating loss (2,435,719) (3,537,172)
Valuation allowance 2,718,768 837,000
------------------- -----------------
Net deferred tax benefit $ (465,838) $ (3,182,162)
=============== ===================
</TABLE>
18
<PAGE>
G. INCOME TAXES (CONTINUED)
Reconciliation of taxes at the federal statutory rate to income tax benefit:
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998
------------------ ------------------
<S> <C> <C>
Tax benefit computed at the federal income tax
rate of 35% $ (3,146,690) $ (2,122,387)
State tax benefit, net of valuation allowance (75,376) (212,356)
Goodwill amortization and impairment 210,000 -
Income of enterprises passed through to shareholders
in periods prior to combination - (103,474)
Other 3,500 3,500
Increase (decrease) in valuation allowance - federal 2,542,728 (747,445)
------------------ -------------------
Net benefit $ (465,838) $ (3,182,162)
================ ==================
</TABLE>
The Company has adopted the provisions of Financial Accounting Statement No.
109, "Accounting for Income Taxes." Under Statement 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial operating
and tax bases of assets and liabilities and are measured using the enacted
marginal tax rates and laws that will be in effect when the differences are
expected to reverse.
Management has evaluated its ability to raise funds in the capital markets to
secure more favorable lease and debt financing (see note E) and has evaluated
the profitability of its acquired subsidiaries, and is of the opinion that the
Company has the ability, more likely than not, of realizing certain of the
benefits of the net operating loss carryforwards within the permitted tax
carryforward period of 20 years. Management is of the opinion that its strategy
of acquiring profitable companies with shares of its common stock combined with
its access to markets under an exclusive agreement with a major shareholder
which is a large carpet manufacturer, will enable it to realize taxable income
sufficient to utilize the net operating loss carryforwards. Accordingly, the
valuation allowance was reduced in 1998 from $1,638,000 to $837,000.
In 1999, the Company incurred significant additional loss carryforwards which
increased its deferred tax assets prior to any valuation allowance. After
considering the effects of IRC Section 382, however, which governs the amount of
net operating loss carryforwards that may be utilized by an entity after a fifty
percentage point change in ownership occurs, company management has decided that
the benefit of losses created in 1999, as well as future losses, may be limited.
A valuation allowance has been placed against the Company's otherwise utilizable
deferred tax assets. The deferred tax asset remaining is the amount of benefit
management expects to realize from its net operating loss carryforwards after
taking IRC Section 382 into account. Accordingly, the increase in the valuation
allowance is primarily due to the increase in the net operating loss
carryforwards.
Because the deferred tax assets relate to net operating loss carryforwards which
the Company doesn't expect to realize in the next twelve months, they have been
classified as long-term.
The amount of deferred tax assets along with the offsetting valuation allowances
are significant estimates in which it is reasonably possible that the effect on
the financial statements will change in the near term due to the fact that
agreements mentioned in the forgoing paragraph may be rescinded at some future
date.
19
<PAGE>
G. INCOME TAXES (CONTINUED)
Current tax benefit for 1998 does not include the tax effects of entities
combined prior to date of consummation which were S-Corporations, partnerships,
or sole proprietorships through the date of combination with the Company.
Accordingly, taxable income prior to this date will be taxed to the former
shareholders of these entities. Net operating loss carryforwards of $14,446,244
will expire in 2011 through 2014.
H. SUBSEQUENT EVENTS
During March, 2000, the Company renegotiated lease agreements for a large
portion of the vehicles under capital lease. The new agreements provide the
Company more favorable buy out terms at the end of the leases. As consideration,
the Company converted the lessors' warrants into 430,000 shares of common stock,
and issued additional warrants to purchase 200,000 shares of common stock at
$3.00 per share.
During January, 2000, the Company granted to board members and officers
incentive stock options to purchase 1,162,000 shares of common stock at $2.40
per share. The options expire in ten years.
During January, 2000, the Company entered into a loan with a shareholder for
$1,000,000. The loan has an interest rate of 55% and is due in six months.
Collateral for the loan is accounts receivable. As incentive to enter into the
loan, the Company issued warrants to purchase 250,000 shares of common stock at
$2.80 per share .
In January, 2000, the Company sold an additional 15,000 shares of Series E
preferred stock for $100.00 per share to complete the 1999 agreement described
in Note D. In February 2000, these shares were converted to 750,000 shares of
common stock. The Company also granted this investor a four year warrant to
purchase 533,333 shares of common stock for $3.00 per share.
In March, 2000, the Company sold 100,000 shares of Series F preferred stock to
an accredited investor for $10.00 per share. Each share of Series F preferred
stock is convertible into five shares of common stock. In conjunction with this
transaction the Company granted the investor a five year warrant to purchase
391,666 shares of common stock for $2.81 per share.
In March, 2000, the Company sold 400,000 shares of common stock to an accredited
investor for $2.50 per share.
On March 31, 2000, the Company completed its acquisition of the MPI entities by
acquiring MPI carpet cleaning companies located in Florida, Washington, Oregon,
Georgia, and Colorado. This final closing was pursuant to a global MPI Agreement
(see Note A), and consisted of the acquisition of three related operating
general partnerships (MPI of So. Florida, MPI of Washington and MPI of Georgia)
and three related operating corporations (MPI of Florida, Inc., MPI of Oregon,
Inc., and Martin & Peterman, Inc. d.b.a. MPI of Colorado). As part of the
acquisition of MPI entities, the Company also acquired from Mitchell J. Martin
and Lloyd E. Peterman all of the outstanding stock of All Fours Distributing,
Inc., a Colorado corporation that owned a 51% general partnership interest in
the MPI entities that were structured as partnerships.
20
<PAGE>
I. LEASE COMMITMENTS AND CONTINGENCIES
The Company leases vehicles, which are recorded in the financial statements as
capitalized leases (see Note C). Total amortization of leased vehicles included
in depreciation expense is $525,559 for 1999 and $242,241 for 1998.
The Company also leases office space and certain equipment under cancelable and
non-cancelable lease arrangements accounted for as operating leases. Rent
expense under non-cancelable leases was $199,801 in 1999 and $82,903 in 1998.
Future minimum payments under non-cancelable lease arrangements for the next
five years are as follows: $379,295 in 2000, $301,538 in 2001, $228,840 in 2002,
$133,245 in 2003, and $33,750 in 2004.
J. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Included in accrued liabilities at December 31, 1999 and 1998 are the following:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C>
Accrued wages $ 268,389 $ 135,235
Dividends payable 105,901 -
Accrued sales and use tax payable 253,722 102,739
Accrued payroll taxes 624,706 386,333
Other 240,347 187,663
-------------------- --------------------
$ 1,493,065 $ 811,970
==================== ===================
</TABLE>
K. SEGMENT INFORMATION
Although the Company performs two distinct services for its customers (carpet
cleaning and restoration services), management cannot yet clearly separate
certain financial information between the two services. Currently management
does not provide or use any internal information for evaluating, separately, the
performance of the two services. Consequently, reporting separate segment
information is impracticable. Management has committed to perfecting the
Company's accounting systems to allow for segregated financial reporting between
the two services in the future.
21
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
(After Issuance of Stock)
VENTURI TECHNOLOGIES, INC.
We the undersigned, John M. Hopkins, President, and Randy K.Johnson,
Secretary of Venturi Technologies, Inc., a Nevada corporation (the
"Corporation") do hereby certify:
That on October 29, 1999, the Board of Directors of said corporation duly
adopted a resolution to amend the Corporation's Articles of Incorporation as
follows:
ARTICLE VI -- CAPITAL STOCK:
Section 1. AUTHORIZED SHARES. The total number of shares which this
Corporation is authorized to issue is 32,000,000 shares of Capital
Stock at $.001 par value per share as set forth in subsections (a) and
(b) of this Section 1 of Article VI.
(a) The total number of shares of common stock which this Corporation
is authorized to issue is 27,000,000 shares at $0.001 par value
per share.
(b) The total number of shares of Preferred Stock which this
Corporation is authorized to issue is 5,000,000 shares at $0.001
par value per share. The Board of Directors shall have authority
to establish, by resolution, one or more series of the authorized
preferred stock and to prescribe classes, series and the number
of each class or series of preferred stock and the voting powers,
designations, preferences, limitations, restrictions and relative
rights of each class or series of preferred stock.
. . . . . . .
<PAGE>
Pursuant to Sections 78.320 and 78.390 of the Nevada Revised Statutes, the
foregoing Amendments to the Articles of Incorporation for the Corporation were
approved by a written consent dated October 29, 1999 by the holders of 3,635,030
shares of common stock and the holders of 2,303,738 shares of Series D Preferred
Stock (each share of which is entitled to two votes on every matter coming
before the shareholders for vote), constituting 52.7% of the 15,627,482 shares
of voting capital stock issued and outstanding.
---------------------------------------
John M. Hopkins
President
---------------------------------------
Randy K. Johnson
Secretary
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
On October ___, 1999, John Hopkins personally appeared before me, a Notary
Public, who acknowledged that he executed the above instrument.
---------------------------------------
Signature of Notary
- ----------------------------
Notary Seal
<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES E CUMULATIVE CONVERTIBLE PREFERRED STOCK
($.001 par value)
OF
VENTURI TECHNOLOGIES, INC.
Venturi Technologies, Inc., a Nevada corporation (the "Corporation"),
pursuant to authority conferred on the Board of Directors of the Corporation by
its Articles of Incorporation, as amended, and in accordance with the provisions
of Section 78.1955 of the Nevada Revised Statutes ("NRS"), certifies that the
Board of Directors of the Corporation, at a meeting duly called and held
pursuant to the NRS, duly adopted the following resolution providing for the
establishment and issuance of a series of Preferred Stock to be designated as
"Series E Cumulative Convertible Preferred Stock" as follows:
RESOLVED, that, pursuant to the authority expressly granted and vested in
the Board of Directors of this Corporation in accordance with the provisions of
its Articles of Incorporation, as amended, a series of the preferred stock of
the Corporation be and hereby is established, consisting of _____ shares, to be
designated as "Series E Cumulative Convertible Preferred Stock" (the "Preferred
Stock"); the Board of Directors be and hereby is authorized to issue such shares
of Preferred Stock from time to time and for such consideration and on such
terms as the Board of Directors shall determine; and subject to the limitations
provided by law and by the Articles of Incorporation, as amended, the powers,
designations, preferences and relative, participating, option or other special
rights of, and the qualifications, limitations or restrictions upon, the
Preferred Stock shall be as follows:
Section 1. Definitions.
"Common Stock" means, collectively, the Corporation's common stock, par
value $.001 per share.
"Conversion Stock" means shares of the Corporation's Common Stock issued or
issuable upon conversion of the Preferred Stock, whether or not a share of
Preferred Stock is presently convertible; provided, that if there is a change
such that the securities issuable upon conversion of the Preferred Stock are
issued by an entity other than the Corporation or there is a change in the class
of securities so issuable, then the term "Conversion Stock" shall
<PAGE>
mean one share of the security issuable upon conversion of the Preferred Stock
if such security is issuable in shares, or shall mean the smallest unit in which
such security is issuable if such security is not issuable in shares.
"Junior Securities" means any of the Corporation's Common Stock.
"Liquidation Value" of any Share, as defined in Section 2A hereof, as of
any particular date shall be equal to $100.00.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Pari Passu Securities" means the outstanding shares of the Corporation's
Series A, Series B, Series C and Series D preferred stock.
"Redemption Date" as to any Share means the date specified in the notice of
any redemption at the Corporation's option or the applicable date specified
herein in the case of any other redemption; provided that no such date shall be
a Redemption Date unless the Liquidation Value of such Share (plus all accrued
and unpaid dividends thereon) is actually paid in full on such date, and if not
so paid in full, the Redemption Date shall be the date on which such amount is
fully paid.
Section 2. Dividends.
2A. General Obligation. When and as declared by the Corporation's Board of
Directors and to the extent permitted under the NRS, the Corporation shall pay
preferential dividends in cash to the holders of the Preferred Stock as provided
in this Section. Except as otherwise provided herein, dividends on each share of
the Preferred Stock shall accrue, whether or not declared or paid, on a daily
basis at the rate of 6% per annum (computed on the basis of a year of 360 days
for the actual number of days elapsed) of the sum of the Liquidation Value
thereof plus all accrued and unpaid dividends thereon from and including the
date of issuance of such share of Preferred Stock to and including the first to
occur of (i) the date on which the Liquidation Value of such share of Preferred
Stock (plus all accrued and unpaid dividends thereon) is paid to the holder
thereof in connection with the liquidation of the Corporation or the Redemption
Price of such share of Preferred Stock (plus all accrued and unpaid dividends
thereon) is paid to the holder thereof in connection with the redemption of such
share of Preferred Stock by the Corporation, (ii) the date on which such share
of Preferred Stock is converted into shares of Conversion Stock hereunder, or
(iii) the date on which such share of Preferred Stock is otherwise acquired by
the Corporation. Such dividends shall accrue whether or not they have been
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. Such dividends shall
be cumulative such that all accrued and unpaid dividends shall be fully paid or
declared with funds irrevocably
<PAGE>
set apart for payment before any dividend, distribution or payment may be made
with respect to any Junior Securities. The Corporation shall not make any
dividend, distribution or payment with respect any Pari Passu Securities unless
a ratable amount is paid toward any accrued and unpaid dividends on the
Preferred Stock. The date on which the Corporation initially issues any share of
Preferred Stock shall be deemed to be its "date of issuance" regardless of the
number of times transfer of such share of Preferred Stock is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share of Preferred Stock.
2B. Dividend Reference Date. All dividends which have accrued on the
Preferred Stock shall be payable on March 1, June1, September 1 and December 1
of each year, beginning March 1, 2000 (collectively, the "Dividend Payment
Dates").
2C. Distribution of Partial Dividend Payments. Except as otherwise provided
herein, if at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Preferred Stock, such payment shall
be distributed ratably among the holders thereof based upon the number of shares
of Preferred Stock held by each such holder.
2D. Payment of Stock Dividends. Notwithstanding any other provision of this
Section 2, in the sole discretion of the holder, any dividends accruing on the
Preferred Stock may be paid in lieu of cash dividends by the issuance of
additional shares of Preferred Stock (including fractional shares) having an
aggregate Liquidation Value at the time of such payment equal to the amount of
the dividend to be paid; provided, that if the Corporation pays less than the
total amount of dividends then accrued on the Preferred Stock in the form of
additional shares, such payment in shares of Preferred Stock shall be made pro
rata among the holders of Preferred Stock based upon the aggregate accrued but
unpaid dividends on the Preferred Stock held by each such holder. If and when
any Preferred Stock is issued under this paragraph 2D for the payment of accrued
dividends, such Preferred Stock shall be deemed to be validly issued and
outstanding and fully paid and nonassessable.
2E. Participating Dividends. In the event that the Corporation declares or
pays any dividends upon the Common Stock (whether payable in cash, securities or
other property) other than dividends payable solely in shares of Common Stock,
the Corporation shall also declare and pay to the holders of the Preferred Stock
at the same time that it declares and pays such dividends to the holders of the
Common Stock, the dividends which would have been declared and paid with respect
to the Common Stock issuable upon conversion of the Preferred Stock had all of
the outstanding Preferred Stock been converted immediately prior to the record
date for such dividend, or if no record date is fixed, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined.
Section 3. Liquidation.
Upon any liquidation, dissolution or winding up of the Corporation (whether
voluntary
<PAGE>
or involuntary), each holder of Preferred Stock shall be entitled to be paid
ratably together with the Pari Passu Securities, before any distribution or
payment is made upon any Junior Securities, an amount in cash equal to the
aggregate Liquidation Value (plus all accrued and unpaid dividends) of all
shares of Preferred Stock held by such holder. If upon any such liquidation,
dissolution or winding up of the Corporation, the Corporation's assets to be
distributed among the holders of the Preferred Stock are insufficient to permit
payment to such holders of the aggregate amount which they are entitled to be
paid under this Section 3, then the entire assets available to be distributed
shall be distributed ratably among such holders based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the Preferred Stock
held by each such holder. Prior to the liquidation, dissolution or winding up of
the Corporation, the Corporation shall declare for payment all accrued and
unpaid dividends with respect to the Preferred Stock, but only to the extent of
funds of the Corporation legally available for the payment of dividends. The
Corporation shall mail written notice of such liquidation, dissolution or
winding up, not less than 60 days prior to the payment date stated therein, to
each record holder of Preferred Stock. Neither the consolidation or merger of
the Corporation into or with any other entity or entities, nor the sale or
transfer by the Corporation of less than substantially all of its assets, nor
the reduction of the capital stock of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section.
Section 4. Priority of Preferred Stock on Dividends and Redemptions.
4A. No Payments With Respect to Junior Securities. So long as any Preferred
Stock remains outstanding, without the prior written consent of the holders of
two-thirds of the outstanding shares of Preferred Stock, the Corporation shall
not, nor shall it permit any Subsidiary to, redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities, nor shall the Corporation
directly or indirectly pay or declare any dividend or make any distribution upon
any Junior Securities. So long as any Preferred Stock remains outstanding,
without the prior written consent of the holders of two-thirds of the
outstanding shares of Preferred Stock, the Corporation shall not, nor shall it
permit any Subsidiary to, redeem, purchase or otherwise acquire directly or
indirectly any Pari Passu Securities, nor shall the Corporation directly or
indirectly pay or declare any dividend or make any distribution upon any Pari
Passu Securities, unless a ratable redemption, purchase, dividend or
distribution is made with respect to the Preferred Stock.
4B. No Issuance of Senior or Pari Passu Securities. The Preferred Stock
shall be senior to or on a parity with all other series of capital stock or
other equity securities of the Corporation as to rights to dividends and
payments upon liquidation, redemption or otherwise. For so long as any Preferred
Stock remains outstanding, without the prior written consent of the holders of
two-thirds of the outstanding shares of the Preferred Stock, the Corporation
shall not amend its Articles of Incorporation or take any other action to
approve or issue any capital stock (including increasing the number of
authorized shares of Preferred Stock) of the Corporation that is senior or pari
passu in right to the payment of dividends, payment upon
<PAGE>
liquidation, redemption or otherwise to the Preferred Stock. Additionally, so
long as any Preferred Stock remains outstanding, without the prior written
consent of the holders of two-thirds of the outstanding shares of Preferred
Stock, the Corporation shall not amend its Articles of Incorporation or take any
other action that would alter the rights, preferences or privileges of the
Preferred Stock as in effect on the date of the original issuance of the
Preferred Stock.
Section 5. Redemption.
5A. Optional Redemptions. The Corporation may at any time redeem all or any
portion of Preferred Stock then outstanding. On any such redemption, the
Corporation shall pay a price per Share equal to 125% of the Liquidation Value
thereof, plus all accrued and unpaid dividends thereon, and all penalties which
have accrued with respect to any of the Preferred Stock under this Designation
and under the Purchase Agreement (the "Redemption Price"). On any such
redemption, all shares of Preferred Stock shall immediately become convertible
in full, notwithstanding any other provision of this Designation.
5B. Redemption Payment. For each share of Preferred Stock which is to be
redeemed, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such share of Preferred Stock) an amount
in immediately available funds equal to the Redemption Price of such share of
Preferred Stock. If the funds of the Corporation legally available for
redemption of Preferred Stock on any Redemption Date are insufficient to redeem
the total number of shares of Preferred Stock to be redeemed on such date, those
funds which are legally available shall be used to redeem the maximum possible
number of shares of Preferred Stock ratably among the holders of the Preferred
Stock to be redeemed based upon the aggregate Liquidation Value of Preferred
Stock (plus all accrued and unpaid dividends thereon) held by each such holder.
At any time thereafter when additional funds of the Corporation are legally
available for the redemption of Shares, such funds shall immediately be used to
redeem the balance of the Preferred Stock which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed. Prior
to any redemption of Preferred Stock, the Corporation shall declare for payment
all accrued and unpaid dividends with respect to the shares of Preferred Stock
which are to be redeemed, but only to the extent of funds of the Corporation
legally available for the payment of dividends.
5C. Notice of Redemption. The Corporation shall mail written notice of each
redemption of any Preferred Stock to each record holder thereof not less than 30
days prior to the date on which such redemption is to be made. Irrespective of
mailing any notice of redemption which relates to a redemption at the
Corporation's option, the Corporation shall not become obligated to redeem the
total number of shares Preferred Stock specified in such notice at the time of
redemption specified therein if such notice contains conditions precedent which
must be satisfied prior to redemption. In case fewer than the total number of
shares of Preferred Stock represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares of Preferred Stock
shall be issued to the holder thereof without cost to such
<PAGE>
holder within ten (10) business days after surrender of the certificate
representing the redeemed shares of Preferred Stock.
5D. Determination of the Number of Each Holder's Shares to be Redeemed.
Except as otherwise provided herein, the number of shares of Preferred Stock to
be redeemed from each holder thereof in redemptions hereunder shall be the
number of shares determined by multiplying the total number of shares of
Preferred Stock to be redeemed times a fraction, the numerator of which shall be
the total number of shares of Preferred Stock then held by such holder and the
denominator of which shall be the total number of shares of Preferred Stock then
outstanding.
5E. Dividends After Redemption Date. No share of Preferred Stock is
entitled to any dividends accruing after the date on which the Redemption Price
is paid to the holder thereof. On such date all rights of the holder of such
share of Preferred Stock shall cease, and such share of Preferred Stock shall
not be deemed to be outstanding.
5F. Redeemed or Otherwise Acquired Shares. Any Preferred Stock which are
redeemed or otherwise acquired by the Corporation shall be canceled, and shall
be deemed to be undesignated authorized and unissued preferred shares.
5G. Other Redemptions or Acquisitions. The Corporation shall not redeem or
otherwise acquire any Preferred Stock, except as expressly authorized herein or
pursuant to a purchase offer made pro-rata to all holders of Preferred Stock on
the basis of the number of shares of Preferred Stock owned by each such holder.
5H. Accrued Dividends Must be Paid Prior to Any Redemption. The Corporation
may not, under an optional redemption, redeem any Preferred Stock, unless all
dividends accrued on the outstanding Preferred Stock through the immediately
preceding Dividend Reference Date have been paid in full.
Section 6. Voting Rights. The holders of the Preferred Stock shall be
entitled to notice of all stockholders' meetings, and except as otherwise
required by applicable law or set forth below, the holders of the Preferred
Stock shall be entitled to vote on all matters submitted to the stockholders for
a vote together with the holders of the Common Stock voting together as a single
class with each share of Common Stock entitled to one vote per share and each
share of Preferred Stock entitled to one vote for each share of Common Stock
issuable upon conversion of such share of Preferred Stock as of the record date
for such vote or, if no record date is specified, as of the date of such vote.
Section 7. Conversion.
7A. Conversion Procedure.
<PAGE>
(i) During the time periods indicated in the table below, any holder
of Preferred Stock may convert up to that percentage of the Preferred Stock
indicated in the table below (including any fraction of a share) held by such
holder into a number of shares of Conversion Stock computed by dividing (A) the
product obtained by multiplying the number of Shares to be converted by $100
and, by (B) the Conversion Price then in effect:
<TABLE>
<S> <C>
On or after the date of this Certificate of Designation 25%
On or after the date which is 30 days after the date of this Certificate of Designation 50%
On or after the date which is 60 days after the date of this Certificate of Designation 75%
On or after the date which is 90 days after the date of this Certificate of Designation 100%
</TABLE>
(ii) Each conversion of Preferred Stock shall be deemed to have been
effected as of the close of business on the date on which the certificate or
certificates representing the Preferred Stock to be converted have been
surrendered at the principal office of the Corporation. At such time as such
conversion has been effected, the rights of the holder of such Preferred Stock
as such holder shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Conversion Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Conversion Stock represented thereby.
(iii) The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the Redemption Price.
(iv) As soon as possible after a conversion has been effected (but in
any event within two (2) business days in the case of subparagraph (a) below),
the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of shares of
Conversion Stock issuable by reason of such conversion in such name or
names and such denomination or denominations as the converting holder has
specified;
(b) payment in an amount equal to all accrued dividends with respect
to each Share converted, which have not been paid prior thereto, provided,
however, that such accrued dividends may, at the holder's option, be
converted into an additional number of shares of Conversion Stock by
dividing the amount of unpaid dividends by the Conversion Price; and
(c) a certificate representing any shares of Preferred Stock which
were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not
converted.
(v) If the Corporation is not permitted under applicable law to pay
any portion
<PAGE>
of the accrued dividends on the Preferred Stock being converted, the Corporation
may (i) pay such dividends to the converting holder as soon thereafter as funds
of the Corporation are legally available for such payment or (ii) such portion
of the unpaid dividends may, at the Corporation's option, be converted into an
additional number of shares of Conversion Stock determined by dividing the
amount of the unpaid dividends to be applied for such purpose, by the Conversion
Price.
(vi) Upon conversion of each Share of Preferred Stock, the Corporation
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.
(vii) The Corporation shall assist and cooperate with any holder of
Preferred Stock required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of Preferred
Stock hereunder (including, without limitation, making any filings required to
be made by the Corporation).
(viii) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be deliverable upon any
conversion of the Preferred Stock, the Corporation, in lieu of delivering the
fractional share therefor, shall round such fraction to the nearest whole share.
(ix) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of the Preferred Stock, such number of
shares of Conversion Stock issuable upon the conversion of all outstanding
Preferred Stock. All shares of Conversion Stock which are so issuable shall,
when issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Corporation shall take all such actions
as may be necessary to assure that all such shares of Conversion Stock may be so
issued without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Conversion
Stock may be listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such issuance).
(x) If the shares of Conversion Stock issuable by reason of such
conversion of Preferred Stock are convertible into or exchangeable for any other
stock or securities of the Corporation, the Corporation shall, at the converting
holder's option, upon surrender of the Shares to be converted by such holder as
provided above together with any notice, statement or payment required to effect
such conversion or exchange of Conversion Stock, deliver to such holder or as
otherwise specified by such holder a certificate or certificates representing
the stock or securities into which the shares of Conversion Stock issuable by
reason of such conversion are so convertible or exchangeable, registered in such
name or names and in such denomination or denominations as such holder has
specified.
<PAGE>
7B. Conversion Price. As used herein, the term "Conversion Price" shall
mean 80% of the the average of the three lowest daily bid prices for the
Preferred Stock quoted on the NASDAQ Stock Market System or other market or
system upon which reported or quoted during the 15 trading days preceding the
date as of which such Conversion Price is being determined.
7C. Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under paragraph 7B, the following
shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner
grants or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
the Conversion Price in effect immediately prior to the time of the granting or
sale of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (a) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such
Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (b) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options.
(ii) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
the Conversion Price in effect immediately prior to the time of such issue or
sale, then the maximum number of shares of Common Stock issuable upon conversion
or exchange of such Convertible Securities shall be deemed to be outstanding and
to have been issued and sold by the Corporation at the time of the issuance or
sale of such Convertible Securities for such price per share. For the purposes
of this paragraph, the "price per share for which Common Stock is issuable"
shall be determined by dividing (a) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (b)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price
<PAGE>
shall be made when Common Stock is actually issued upon the conversion or
exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Conversion Price in effect at the time of such change
shall be immediately adjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold;
provided that if such adjustment would result in an increase of the Conversion
Price then in effect, such adjustment shall not be effective until 30 days after
written notice thereof has been given by the Corporation to all holders of the
Preferred Stock. For purposes of paragraph 7C, if the terms of any Option or
Convertible Security which was outstanding as of the date of issuance of the
Preferred Stock are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change; provided that no such change shall at
any time cause the Conversion Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued; provided that if such expiration or termination would result
in an increase in the Conversion Price then in effect, such increase shall not
be effective until 30 days after written notice thereof has been given by the
Corporation to all holders of the Preferred Stock. For purposes of paragraph 7C,
the expiration or termination of any Option or Convertible Security which was
outstanding as of the date of issuance of the Preferred Stock shall not cause
the Conversion Price hereunder to be adjusted unless, and only to the extent
that, a change in the terms of such Option or Convertible Security caused it to
be deemed to have been issued after the date of issuance of the Preferred Stock.
(v) Calculation of Consideration Received. If any Common Stock, Option
or Convertible Security is issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
<PAGE>
of consideration received by the Corporation shall be the Conversion Price
determined as of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity in connection with
any merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined
jointly by the Corporation and the holders of two-thirds of the outstanding
Preferred Stock. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration shall be
determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Corporation and the holders of two-thirds
of the outstanding Preferred Stock. The determination of such appraiser shall be
final and binding upon the parties, and the fees and expenses of such appraiser
shall be borne by the Corporation.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of the holders
of Common Stock for the purpose of entitling them (a) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (b) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
7D. Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
7E. Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or
<PAGE>
substantially all of the Corporation's assets or other transaction, in each case
which is effected in such a manner that the holders of Common Stock are entitled
to receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, is referred to herein as
an "Organic Change". Prior to the consummation of any Organic Change, the
Corporation shall make appropriate provisions (in form and substance reasonably
satisfactory to the holders of two-thirds of the Preferred Stock then
outstanding) to insure that each of the holders of Preferred Stock shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Preferred Stock,
such shares of stock, securities or assets as such holder would have received in
connection with such Organic Change if such holder had converted its Preferred
Stock immediately prior to such Organic Change. In each such case, the
Corporation shall also make appropriate provisions (in form and substance
satisfactory to the holders of two-thirds of the Preferred Stock then
outstanding) to insure that the provisions of this Section 7 and Sections 8 and
9 hereof shall thereafter be applicable to the Preferred Stock (including, in
the case of any such consolidation, merger or sale in which the successor entity
or purchasing entity is other than the Corporation, an immediate adjustment of
the Conversion Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Conversion Stock acquirable and receivable upon
conversion of Preferred Stock, if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation, merger or
sale). The Corporation shall not effect any such consolidation, merger or sale,
unless prior to the consummation thereof, the successor entity (if other than
the Corporation) resulting from consolidation or merger or the entity purchasing
such assets assumes by written instrument (in form and substance satisfactory to
the holders of two-thirds of the Preferred Stock then outstanding), the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
7F. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of Preferred Stock;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 7 or decrease the number of shares
of Conversion Stock issuable upon conversion of each Share.
7G. Notices.
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Preferred Stock,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
<PAGE>
(ii) The Corporation shall give written notice to all holders of
Preferred Stock at least 20 days prior to the date on which the Corporation
closes its books or takes a record (a) with respect to any dividend or
distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the holders of
Preferred Stock at least 20 days prior to the date on which any Organic Change
shall take place.
Section 8. Liquidating Dividends.
If the Corporation declares or pays a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Corporation shall pay to the holders of Preferred Stock at
the time of payment thereof the Liquidating Dividends which would have been paid
on the shares of Conversion Stock that would have been issued had such Preferred
Stock been converted immediately prior to the date on which a record is taken
for such Liquidating Dividend, or, if no record is taken, the date as of which
the record holders of Common Stock entitled to such dividends are to be
determined.
Section 9. Purchase Rights.
If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Preferred Stock shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Conversion Stock acquirable upon conversion of such
holder's Preferred Stock immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
Section 10. Events of Noncompliance.
10A. Definition. An Event of Noncompliance shall have occurred if:
(i) the Corporation fails to pay on any Dividend Payment Date the full
amount of dividends then accrued on the Preferred Stock, whether or not such
payments are legally permissible or are prohibited by any agreement to which the
Corporation is subject;
<PAGE>
(ii) the Corporation fails to make any redemption payment (whether
following the giving of notice pursuant to paragraph 4C or otherwise) with
respect to the Preferred Stock which it is required to make hereunder, whether
or not such payment is legally permissible or is prohibited by any agreement to
which the Corporation is subject;
(iii) the Corporation breaches or otherwise fails to perform or
observe any material provision contained herein, in the Purchase Agreement or in
the Related Documents (as defined in the Purchase Agreement) and (other than
with respect to Section 8.1 or 8.2(l) of the Purchase Agreement, or Section 7
hereof, the breach of or failure to perform which shall result in an immediate
Event of Noncompliance) such failure is not cured within fifteen (15) days after
the occurrence thereof;
(iv) any representation or warranty contained in the Purchase
Agreement or required to be furnished to any holder of Preferred Stock pursuant
to the Purchase Agreement, or any information contained in writing required to
be furnished by the Corporation or any Subsidiary to any holder of Preferred
Stock, is false or misleading in any material respect on the date made or
furnished;
(v) the Corporation or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the Federal Bankruptcy Code; or the Corporation or any Subsidiary
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or any Subsidiary or of any
substantial part of the assets of the Corporation or any Subsidiary, or
commences any proceeding (other than a proceeding for the voluntary liquidation
and dissolution of any Subsidiary) relating to the Corporation or any Subsidiary
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or the Corporation or
any Subsidiary takes any action to authorize any of the foregoing; or any such
petition or application is filed, or any such proceeding is commenced, against
the Corporation or any Subsidiary and either (a) the Corporation or any such
Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein or (b) such petition, application or proceeding is not
dismissed within 60 days;
(vi) any material provision of the Purchase Agreement or any Related
Document shall at any time for any reason be declared to be null and void, or
the validity or enforceability thereof shall be contested by any party thereto,
or a proceeding shall be commenced by the Corporation or any Governmental
Authority or other regulatory body having jurisdiction over the Corporation,
seeking to establish the invalidity or enforceability thereof, or the
Corporation shall deny in writing that it has any liability or obligation
purported to be created under the Purchase Agreement or any Related Document;
<PAGE>
(vii) (A) any registration statement required to be filed and declared
effective by the Corporation pursuant to the Purchase Agreement shall not become
effective as provided in the Purchase Agreement or shall cease to be effective,
(B) the Securities and Exchange Commission shall issue any stop order suspending
the effectiveness under the Securities Act of any registration statement
required to be filed and declared effective by the Corporation pursuant to the
Purchase Agreement or any state securities commission suspends the qualification
of the Registrable Securities covered thereby for offering or sale in any
jurisdiction, (C) any proceeding for purposes of either (A) or (B) above is
initiated, or (D) the Common Stock is suspended from trading on or the price for
the Common Stock is not quoted or reported on the NASDAQ Stock Market System or
the NASD's OTC Bulletin Board;
(viii) the Company at any time shall not have reserved and available
authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon conversion of the Preferred Stock, in the number which would be
issuable upon the conversion of all of the issued and outstanding Preferred
Stock; or
(ix) the occurrence of a Material Adverse Change (as defined in the
Purchase Agreement).
10B. Consequences of Events of Noncompliance.
(i) If an Event of Noncompliance (other than an Event of Noncompliance
due to paragraph 10A(v)) has occurred and is continuing, (a) any holder of any
shares of Preferred Stock then outstanding may demand (by written notice
delivered to the Corporation), notwithstanding any other provision contained
herein, (1) the immediate conversion of all or any shares of such holder's or
holders' Preferred Stock at the applicable Conversion Price as of the date of
such holder's notice or (2) the immediate redemption of all or any portion of
the Preferred Stock owned by such holder or holders at a price per share equal
to the Redemption Price as of the date of such holder's notice plus interest
thereon at the rate of 3.5% per month or portion thereof from the date of the
occurrence of an Event of Noncompliance until paid in full, and (b) the dividend
rate on the Preferred Stock (including any Preferred Stock not redeemed or
converted pursuant to (1) and (2) above) shall increase immediately by an
increment of two percentage points. Thereafter, during the continuance of an
Event of Noncompliance and until such time as no Event of Noncompliance exists,
the dividend rate shall increase automatically at the end of each succeeding
90-day period by an additional increment of two percentage points (but in no
event shall the dividend rate exceed 15%). Any increase of the dividend rate
resulting from the operation of this subparagraph shall terminate as of the
close of business on the date on which no Event of Noncompliance exists, subject
to subsequent increases pursuant to this paragraph. The Corporation shall give
prompt written notice of any holder's election for immediate conversion or
redemption to the other holders of Preferred Stock (but in any event within five
days after receipt of the initial demand for conversion or redemption), and each
such other holder may demand immediate conversion or redemption
<PAGE>
of all or any portion of such holder's Preferred Stock by giving written notice
thereof to the Corporation within seven days after receipt of the Corporation's
notice. The Corporation shall convert or redeem all Preferred Stock as to which
rights under this paragraph have been exercised within 5 days after receipt of
the initial demand for conversion or redemption.
(ii) If an Event of Noncompliance of the type described in
subparagraph 10A(v) has occurred, all of the Preferred Stock then outstanding
shall be subject to immediate redemption by the Corporation (without any action
on the part of the holders of the Preferred Stock) at a price per share equal to
the Redemption Price on the date of the occurrence of the Event of Noncompliance
plus interest thereon at the rate of 3.5% per month or portion thereof from the
date of the occurrence of the Event of Noncompliance until paid in full. The
Corporation shall immediately redeem all Preferred Stock upon the occurrence of
such Event of Noncompliance.
(iii) If any Event of Noncompliance of the type described in
subparagraph 10A(i) occurs, for each such occurrence of the failure to pay on
any Dividend Payment Date the full amount of dividends then accrued on the
Preferred Stock, whether or not such payments are legally permissible or are
prohibited by any agreement to which the Corporation is subject, the Conversion
Price calculated at the time of conversion shall be reduced by $0.50 per share.
In no event shall any Conversion Price adjustment hereunder be rescinded.
(iv) If any Event of Noncompliance of the type described in
subparagraph 10A(ii) occurs the Conversion Price calculated at the time of
conversion shall be reduced to 75% of the applicable Conversion Price in effect
at the time of conversion immediately prior to such adjustment. Thereafter, for
each succeeding 90-day period that the Event of Noncompliance continues
following the initial Event of Noncompliance referred to above, the Conversion
Price calculated at the time of conversion shall be reduced to 75% of the
Conversion Price in effect at the time of conversion immediately prior to such
adjustment. In no event shall any Conversion Price adjustment hereunder be
rescinded.
For example, assume that an Event of Noncompliance of the type described in
subparagraph 10A(ii) has occurred and the Preferred Stock becomes immediately
convertible. Then assume that one year prior to such Event of Noncompliance
there had been a two-for-one stock split by the Corporation. Finally, assume
that, pursuant to Section 7B(i), the Conversion Price prior to the stock split
was $5.00. In this case, the Conversion Price of $5.00 would first be decreased
pursuant to Section 7D from $5.00 to $2.50. Then the Conversion Price calculated
at the time of conversion would be reduced to 75% of $2.50, or $1.875. If the
Event of Noncompliance had existed for an additional 90 days following the
initial Event of Noncompliance the Conversion Price at the time of conversion
would be reduced to 75% of $1.875, or $1.40625. If the Event of Noncompliance
had existed for an additional 90 days following the initial Event of
Noncompliance the Conversion Price at the time of conversion would be further
reduced to 75% of $1.40625, or $1.05469.
<PAGE>
(v) If any Event of Noncompliance of the type described in
subparagraph 10A(vi) occurs, for each such occurrence the Conversion Price
calculated at the time of conversion shall be reduced by an amount equal to the
quotient of (a) the amount of the judgment referred to in subparagraph 10A(vi)
divided by (b) the number of shares of Common Stock Deemed Outstanding at the
time of the Event of Noncompliance.
(vi) If any Event of Noncompliance of the type described in
subparagraph 10A(viii) occurs, for each such occurrence the Company hereby
covenants and agrees to issue or cause to be issued to the Purchaser on any such
date and on every date which is 30 days or a multiple thereof after such date,
until such Event of Noncompliance is cured, additional shares of Common Stock
equal in number to 10% of the total number of shares of Common Stock issued or
issuable upon conversion of all issued and outstanding Preferred Stock.
(vii) If any Event of Noncompliance exists, each holder of Preferred
Stock shall also have any other rights which such holder is entitled to under
the Purchase Agreement or any other contract or agreement and any other rights
which such holder may have pursuant to applicable law.
(viii) Neither the Corporation nor holders of the Preferred Stock
shall file any Tax Return (as defined in the Purchase Agreement) or take any
position with any taxing authority treating a reduction in the Conversion Price
pursuant to this Section 10B as a deemed dividend.
10C. Right to Cure. Any breach, default in performance of any provision or
Event of Noncompliance of the Purchase Agreement or any of the Related Documents
which directly affects the Purchaser's ability to acquire the Preferred Shares
and Warrants, convert the Preferred Shares, Exercise the Warrants or sell
pursuant to a valid registration shall be interpreted in accordance with the
terms of this Purchase Agreement or the Related Document. Any breach, default in
performance of any provision or Event of Noncompliance of this Purchase
Agreement or any of the Related Documents which does not directly affect the
Purchaser's ability to acquire the Preferred Shares and Warrants, convert the
Preferred Shares, Exercise the Warrants or sell pursuant to a valid registration
shall be subject to written notice delivered to the Company and may be cured by
the Company during the five (5) days after receipt of written notice of such
breach, default or Event of Noncompliance.
Section 11. Registration of Transfer.
The Corporation shall keep at its principal office a register for the
registration of Preferred Stock. Subject to compliance with applicable
securities laws, upon the surrender of any certificate representing Preferred
Stock at such place, the Corporation shall, at the request of the record holder
of such certificate, execute and deliver (at the holder's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of Preferred Stock represented by the surrendered
certificate. Each such new certificate
<PAGE>
shall be registered in such name and shall represent such number of shares of
Preferred Stock as is requested by the holder of the surrendered certificate and
shall be substantially identical in form to the surrendered certificate, and
dividends shall accrue on the Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such
Preferred Stock represented by the surrendered certificate. All transfers of
Preferred Stock shall be subject to any restrictions imposed by applicable
federal and state securities laws.
Section 12. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of any of the Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at the holder's expense) execute and deliver
in lieu of such certificate a new certificate of like kind representing the
number of shares of Preferred Stock of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends shall accrue on the
Preferred Stock represented by such new certificate from the date to which
dividends have been fully paid on such lost, stolen, destroyed or mutilated
certificate.
Section 13. Amendment and Waiver.
No amendment, modification or waiver shall be binding or effective with
respect to any provision of Sections 1 to 10 hereof without the prior written
consent of the holders of at least 51% of the Preferred Stock outstanding at the
time such action is taken; provided that no such action shall change (a) the
rate at which or the manner in which dividends on the Preferred Stock accrue or
the times at which such dividends become payable or the amount payable on
redemption of the Preferred Stock or the times at which redemption of Preferred
Stock is to occur, without the prior written consent of the holders of at least
80% of the Preferred Stock then outstanding, (b) the Conversion Price of the
Preferred Stock or the number of shares or class of stock into which the
Preferred Stock is convertible, without the prior written consent of the holder
of at least 80% of the Preferred Stock then outstanding or (c) the percentage
required to approve any change described in clauses (a) and (b) above, without
the prior written consent of the holders of at least 80% of the Preferred Stock
then outstanding.
Section 14. Notices.
Except as otherwise expressly provided hereunder, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive
<PAGE>
offices and (ii) to any stockholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated by any such
holder).
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Designation to be signed by its President
and Secretary this ____ day of December, 1999
CERTIFICATE OF PRESIDENT AND SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned John M. Hopkins, President of Venturi Technologies,
Inc., a Nevada corporation (the "Corporation"), and Randy K. Johnson, Secretary
of the Corporation, do hereby certify that the Articles of Incorporation for the
Corporation provide that Series of preferred stock may be established by
resolution of the Board of Directors, and that the above and foregoing
Certificate of Designation of Preferences, Limitations and Relative Rights of
said Corporation was duly and regularly adopted as such by a resolution of all
of the members of the Board of Director of the Corporation on December ___,
1999.
Dated: December ___, 1999.
------------------------------------
John M. Hopkins, President
------------------------------------
Randy K. Johnson, Secretary
ACKNOWLEDGMENT
STATE OF UTAH )
)ss:
COUNTY OF UTAH )
On the ___ day of December, 1999, personally appeared before me John M.
Hopkins, President of Venturi Technologies, Inc., personally known to me or
proved to me on the basis of satisfactory evidence to be the person whose name
is signed on the preceding document, and acknowledged to me that he signed it
voluntarily for its stated purpose.
------------------------------------
NOTARY PUBLIC
<PAGE>
Exhibit A
FORM OF NOTICE OF CONVERSION
Venturi Technologies, Inc.
763 North 530 East
Orem Utah 84057
cc: [Name of Transfer Agent]
Re: Series E Cumulative Convertible Preferred Stock
Gentlemen:
The undersigned registered holder hereby elects to convert _____ [number]
shares of Series E Cumulative Convertible Preferred Stock of the Corporation
into shares of Common Stock, par value $.001 per share, of the Corporation
pursuant to the Certificate of Designation for Series E Preferred Stock dated
December ___, 1999.
The number of shares of Common Stock to be issued to the undersigned is
_____ shares, based on a conversion price of $___ per share.
Date:
------------- ------------------------------------
Authorized Signature of Registered Holder
CONFIRMATION OF RECEIPT
OF NOTICE OF CONVERSION
AND CONVERSION CALCULATION:
Acknowledged: VENTURI TECHNOLOGIES, INC.
By
---------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION
OF
SERIES E CUMULATIVE CONVERTIBLE PREFERRED STOCK
(After Issuance of Stock)
VENTURI TECHNOLOGIES, INC.
Pursuant to Section 78.1955 of the Nevada Revised Statutes, we the
undersigned, John Hopkins, President, and Randy K. Johnson, Secretary, of
Venturi Technologies, Inc., a Nevada corporation (the "Corporation") do hereby
certify:
On January 18, 2000, the Board of Directors of the Corporation duly adopted
a resolution to amend the Certificate of Designation of Series E Cumulative
Convertible Preferred Stock as follows:
1. Section 7B of the Certificate of Designation is amended so that, as
amended, Section 7B reads in its entirety as follows:
7B. Conversion Price. As used herein, the term "Conversion Price"
shall mean 80% of the average of the three lowest daily bid prices for
the Common Stock quoted on the NASDAQ Stock Market System or other
market or system upon which shares of the Corporation's Common Stock
are reported or quoted during the 15 trading days preceding the date
as of which such Conversion Price is being determined; provided,
however, that in no event shall the Conversion Price be less than
$2.00 per share or more than $3.00 per share.
2. Section 5A shall be renumbered as 5A(i), and a new Section 5A(ii) shall
be added to read in its entirety follows:
5A(ii) Mandatory Redemption. If the daily closing price for the
Corporation's Common Stock is less than $2.00 per share for a period
of three (3) consecutive trading days, the holder(s) of Preferred
Stock shall have the right to require the Corporation to redeem all or
any portion of the Preferred Stock then outstanding, by giving to the
Corporation written notice of the exercise of such right and the date,
which shall not be less than thirty (30) days after the date of such
notice, on which such redemption is to be made. On any such
redemption, the Corporation shall pay to the holder of the Preferred
Stock to be redeemed an amount equal to the sum of (i) the Liquidation
Value thereof; (ii) all accrued and unpaid dividends thereon; (iii)
all penalties which have accrued with respect to any of the Preferred
<PAGE>
Stock under this Designation and under any agreement pursuant to which
shares of Preferred Stock have been issued; and (iv) $500,000.00
multiplied by a fraction, the numerator of which shall be the number
of Preferred Shares to be redeemed and the denominator of which shall
be the number of Preferred Shares outstanding on the Redemption Date
(the "Redemption Price" for purposes of a Mandatory Redemption). Upon
delivery of the notice of a mandatory redemption as provided herein,
all shares of Preferred Stock shall immediately become convertible in
full, notwithstanding any other provision of this Designation. In
addition, upon a mandatory redemption as provided herein, the
Corporation shall issue, on the Redemption Date for such mandatory
redemption, all warrants for the purchase of shares of Common Stock
which would be issuable under any agreement relating to the issuance
of shares of Preferred Stock if the maximum number of shares of
Preferred Stock issuable under such agreement had been issued on the
Redemption Date for such mandatory redemption.
Pursuant to Section 78.1955 of the Nevada Revised Statutes, the foregoing
Amendment to the Certificate of Designation of Series E Cumulative Convertible
Preferred Stock was approved by a written consent dated January 18, 2000 by the
holders of all 5,000 outstanding shares of such Series E Preferred Stock.
------------------------------------------
John Hopkins, President
------------------------------------------
Randy K. Johnson, Secretary
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
On January ___, 2000, John Hopkins personally appeared before me, a
Notary Public, who acknowledged that he executed the above instrument.
-----------------------------------
Signature of Notary
----------------------------
Notary Seal
<PAGE>
CERTIFICATE OF DESIGNATION OF
PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS
FOR
VENTURI TECHNOLOGIES, INC.
6% CUMULATIVE CONVERTIBLE SERIES F PREFERRED STOCK
(300,000 SHARES AUTHORIZED)
DEFINITIONS. For purposes of this Certificate of Designation of
Preferences, Limitations, and Relative Rights, (the "Designation"), the
following definitions shall apply:
(a) "Company" and "Corporation" shall mean Venturi Technologies, Inc.
(b) "Original Issue Date" shall mean, with respect to each Series of
Preferred Stock, the date upon which shares of each Series of Preferred
Stock are first issued.
(c) "Original Issue Price" shall mean, with respect to each Series of
Preferred Stock, the original purchase price per share paid by the
stockholder to the Corporation.
(d) "Parity Stock" shall mean the Series A, Series B, Series C, Series D
and Series E Preferred Stock issued by the Corporation, and any stock
subsequently issued that is of equal priortiy to the Series F Preferred
Stock
(e) "Series F Preferred Stock" shall mean the 6% Cumulative Convertible
Series F Preferred Stock established by resolution of the Board of
Directors of the Company.
6% CUMULATIVE CONVERTIBLE SERIES F PREFERRED STOCK
300,000 Shares Authorized
The Board of Directors of the Company has established by resolution a 6%
Cumulative Convertible Series F Preferred Stock, and has authorized the issuance
of up to 300,000 shares of such stock.
The 6% Cumulative Convertible Series F Preferred Stock established by
resolution of the Board of Directors of the Company shall have the following
preferences, limitations and relative rights:
1. DIVIDENDS.
(a) DIVIDEND PREFERENCE. The holders of outstanding shares of Series F
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors of the Company out of funds legally available for the
payment of dividends, cumulative quarterly dividends at the annual rate of
6% of the Original Issue Price per share, in
<PAGE>
preference to and in priority over any dividends with respect to Common
Stock. Dividends on the Series A Preferred Stock shall accumulate from and
including the Original Issue Date and shall be payable on the tenth day
after the end of each calendar quarter with the first payment due on the
tenth day after the end of the first full calendar quarter following the
Original Issue Date. Such dividends shall, at the option of the Company,
cumulate and be paid in cash at such time as funds are then legally
available to pay such dividends, or be paid to holders of Series F
Preferred Shares in shares of the Company's $0.001 par value common stock
valued at the average closing price for the Company's common stock for the
five (5) trading days before the record date for such dividend. From and
after the date that the Company's earnings before interest, taxes,
depreciation and amortization exceed ten percent (10%) of the Company's
gross revenues for a twelve month period, the determination of whether such
dividends shall be paid in cash or in common stock shall be made in the
sole discretion of the holders of Series F Preferred Shares.
(b) DIVIDEND RECORD DATE. As the Board of Directors of the Company declares
dividends on the Series F Preferred Stock, the Company or a selected agent,
as Paying Agent, shall disburse such funds to the holders of record of the
Series F Preferred Stock as of the last day of the quarter for which a
dividend is being paid ("Record Date").
(c) PRIORITY OF DIVIDENDS. As long as shares of the Series F Preferred
Stock shall be outstanding, if the Company shall be in default or in
arrears in respect to the payment of dividends on the Series F Preferred
Stock or any stock subsequently issued that is of equal priority to the
Series F Preferred Stock ("Parity Stock") or with respect to the optional
redemption with respect to the Series F Preferred Stock or the Parity
Stock, the Company shall not declare, pay or set apart any funds for the
payment of dividends, redemption, repurchase, retirement or sinking fund
payment on any of the Common Stock.
(d) PAYMENT OF ACCUMULATED DIVIDENDS. Dividends in arrears with respect to
the Series F Preferred Stock may be declared and paid at any time by the
Company without interest or premium and shall be paid, as in the case of
regular dividends, to the holders of record of the Series F Preferred Stock
on the Record Date established with respect to such payment in arrears. The
ability of the Company to pay dividends on the Series F Preferred Stock
shall be limited by the availability of funds and the provisions of the
General Corporation Law of the State of Nevada and any other applicable
law.
2. LIQUIDATION RIGHTS.
(a) LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, either voluntary or involuntary, the holders of
the Series F Preferred Stock shall be entitled to receive, after all debts
are paid, out of the assets of the Company, the sum of $10.00 per share
plus an amount equal to all accumulated and
<PAGE>
unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding up, before any payment shall be made or any assets distributed to
the holders of Common Stock.
(b) PRIORITY. If, upon any such liquidation, dissolution or winding up of
the Company, the assets to be distributed among the holders of the Series F
Preferred Stock are insufficient to permit the payment to such holders of
the full amount specified in the previous paragraph, then the entire assets
of the Company legally available for distribution shall be distributed with
equal priority and pro rata among the holders of the Series F Preferred
Stock and the Parity Stock in proportion to the numbers of shares of Series
F Preferred Stock and Parity Stock held by them.
(c) REMAINING ASSETS. After payment of the full $10.00 per share
liquidation preference plus any accumulated and unpaid dividends, the
holders of the Series F Preferred Stock will not share in any other assets
of the Company distributed to holders of equity securities.
(d) REORGANIZATION. Neither the voluntary sale, conveyance, exchange or
transfer of all or any part of the property or assets of the Company, nor
the consolidation, merger or other business combination of the Company with
or into any corporation, shall be considered a voluntary or involuntary
liquidation, dissolution, or winding up of the Company.
3. REDEMPTION. The Company shall have the option, but not the
obligation, to call the Series F Preferred Stock for redemption at any
time. The price paid to the holders of the Series F Preferred Stock by the
Company for any such redemption shall equal 120% of the Original Issue
Price until the first anniversary date of the date of issuance of the
Series F Preferred Stock, 140% of the Original Issue Price from the first
anniversary date to the second anniversary date, 160% of the Original Issue
Price from the second anniversary date to the third anniversary date, 180%
of the Original Issue Price from the third anniversary date to the fourth
anniversary date, and 200% of the Original Issue Price after the fourth
anniversary date, plus any accrued or unpaid dividends to the date of the
call for redemption. Such redemption price shall be paid by the Corporation
in cash.
4. CONVERSION. The holders of the Series F Preferred Stock shall have
conversion rights as follows:
(a) RIGHT TO CONVERT. Holders of shares of Series F Preferred Stock shall
have the right, exercisable at any time, to convert any or all of such
Shares into shares of Common Stock of the Company on the basis of five (5)
shares of Common Stock for each one (1) share of Series F Preferred Stock
at the office of the Corporation or any transfer agent for the Series F
Preferred Stock, except that if any of the Series F Preferred Stock is
called for redemption, the conversion rights pertaining thereto shall
terminate at the close of business on the date fixed for redemption unless
the Company
<PAGE>
defaults on the payment of the redemption price plus accumulated and unpaid
dividends.
(b) MERGER OR RECLASSIFICATION. In the event of any merger of the Company
with or into any other corporation (other than a merger in which the
Company is a surviving corporation) or in the event of any sale or transfer
of all or substantially all of the assets of the Company, or in the event
of a reclassification, capital reorganization or change of outstanding
shares of common stock, any holder of the Series F Preferred Stock will be
entitled after the occurrence of such event, to receive on conversion the
consideration which the holder would have received had such holder
converted such holder's Series F Preferred Stock to Common Stock
immediately prior to the occurrence of the event, and had such holder
elected to receive the consideration in the form and manner elected by the
holders of Common Stock.
(c) MANDATORY CONVERSION. The Company shall have the right to require the
holders of Series F Preferred Stock to convert their shares of Series F
Preferred Stock into shares of Common Stock on the basis of five (5) shares
of Common Stock for one (1) share of Series F Preferred Stock in connection
with the consummation of an underwritten public offering of the Company's
Common Stock in which the Company successfully raises capital in the gross
amount of at least $10 million.
(d) MECHANICS OF CONVERSION. Before any holder of Series F Preferred Stock
shall be entitled to convert the same into shares of Common Stock, and to
receive certificates therefor, he or she shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Series F Preferred Stock, and shall give
written notice to the Corporation at such office that he or she elects to
convert the same; provided, however, that in the event of a mandatory
conversion pursuant to the preceding paragraph, the outstanding shares of
Series F Preferred Stock shall be converted automatically upon notice to
the holders of Series F Preferred Stock by the Company without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent; provided further, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such mandatory conversion unless either the certificates
evidencing such shares of Series F Preferred Stock are delivered to the
Corporation or its transfer agent as provided above, or the holder notifies
the Corporation or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation and the transfer agent from any
loss incurred by it in connection with such certificates. The Corporation
shall, as soon as practicable after such delivery, or after such agreement
and indemnification, issue and deliver to such holder of Series F Preferred
Stock, a certificate or certificates for the number of shares of Common
Stock to which he or she shall be entitled as set forth above, plus, if
applicable, a check payable to the holder in the amount of any declared and
unpaid dividends on the converted Series F Preferred Stock. Such conversion
shall be deemed to have been made immediately prior to the close of
business on the date of
<PAGE>
such surrender of the shares of Series F Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date;
provided, however, that if the conversion is in connection with an
underwritten offer of securities registered pursuant to the Securities Act
of 1933, as amended, the conversion may, at the option of any holder
tendering Series F Preferred Stock for conversion, be conditioned upon the
closing of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Series F Preferred Stock shall not be deemed to have
converted such Series F Preferred Stock until immediately prior to the
closing of the sale of such securities.
(e) NO IMPAIRMENT. The Corporation will not, by amendment of its Articles
of Incorporation or through any reorganization, transfer of assets, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed hereunder by the Corporation but will at all times
in good faith assist in the carrying out of all the provisions of this
Section and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series F Preferred Stock against impairment.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall at
all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion
of the shares of the Series F Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series F Preferred Stock;
and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series F Preferred Stock, the Corporation shall
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
5. VOTING. Each holder of shares of Series F Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series F Preferred Stock held by such
holder of Series F Preferred Stock could then be converted. The holders of
shares of the Series F Preferred Stock shall be entitled to vote on all
matters on which the Common Stock shall be entitled to vote, unless
otherwise required by applicable law or in cases where the rights and
privileges of the Common Stock holders may be altered or diminished. The
holders of Series F Preferred Stock shall be entitled to notice of any
shareholders meeting in accordance with the Bylaws of the Company.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares into
which shares of Series F Preferred Stock held by each holder could be
converted), shall be disregarded.
<PAGE>
6. AMENDMENTS AND CHANGES. As long as any of the Series F Preferred
Stock shall be issued and outstanding, the Company shall not, without first
obtaining the approval (by vote or consent as provided by law) of the
holders of a majority of the total number of shares of the Series F
Preferred Stock then outstanding:
(i) alter or change the rights, preferences, or privileges of the
Series F Preferred Stock materially or adversely; or
(ii) increase the authorized number of shares of Series F
Preferred Stock; or
(iii) create any new class of shares having rights,
preferences or privileges senior to the Series F Preferred
Stock holders as to dividend rights, redemption rights or
liquidation rights.
7. NOTICES. Any notice required by the provisions of this Designation
to be given to the holders of Series F Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appearing on
the books of the Company.
<PAGE>
CERTIFICATE OF PRESIDENT AND SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned John M. Hopkins, President of Venturi Technologies,
Inc., a Nevada corporation (the "Corporation"), and Randy K. Johnson, Secretary
of the Corporation do hereby certify that the Articles of Incorporation for the
Corporation provide that Series of preferred stock may be established by
resolution of the Board of Directors, and that the above and foregoing
Certificate of Designation of Preferences, Limitations and Relative Rights of
said Corporation was duly and regularly adopted as such by a resolution of all
of the members of the Board of Directors of the Corporation on March 7, 2000.
DATED: March 7, 2000.
----------------------------------
John M. Hopkins
President
----------------------------------
Randy K. Johnson
Secretary
ACKNOWLEDGMENT
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 7th day of March, 2000 personally appeared before me John M.
Hopkins, President of Venturi Technologies, Inc. and Randy K. Johnson, Secretary
of Venturi Technologies, Inc., personally known to me or proved to me on the
basis of satisfactory evidence to be the persons whose names are signed on the
preceding document, and acknowledged to me that they signed it voluntarily for
its stated purpose.
----------------------------------
NOTARY PUBLIC
<PAGE>
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS is entered into on the ____
day of November, 1999, by and between Jon T. Freeberg and Bridget E. Freeberg
(collectively referred to as the "Seller"), doing business in Louisville and
Lexington, Kentucky, under the names Kentuckiana's Best Cleaning Co., with an
address of 2314 Watterson Trail, Louisville, Kentucky 40299 and Kentucky's Best
Cleaning Co., with an address of 2321 Fortune Drive, Suite 105, Lexington,
Kentucky 40509, and Venturi Technologies, Inc., a Nevada corporation, having its
principal office at 763 North 530 East, Orem, Utah 84097 ("Purchaser").
WHEREAS, Seller owns and operates a carpet and furniture cleaning business
under the names "Kentuckiana's Best Cleaning Co." located in the Louisville area
of Kentucky and "Kentucky's Best Cleaning Co." located in the Lexington area of
Kentucky (the "Business");
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser all of the Seller's Assets used in, and connected with, the
Business in exchange for cash, a promissory note and Purchaser's common stock
upon the terms described in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
the parties agree as follows:
1. PURCHASE AND SALE OF BUSINESS. Seller shall assign, transfer, convey and
deliver to the Purchaser all of its right, title and interest in and to the
rights, properties, assets, claims, contracts and businesses of every kind,
character and description, whether tangible or intangible, whether real,
personal or mixed, whether accrued, contingent or otherwise, and wherever
located (each of which is referred to as an "Asset") relating to or comprising
the Business; including, without limitation, all real property, buildings,
equipment and machinery; goodwill and all unfilled customer orders or service
requests; all inventories, accounts receivable, cash on hand and petty cash,
notes receivable, advances, deposits and other receivables; all leaseholds,
fixtures and leasehold improvements; all supplies, vehicles, furniture, office
furnishings and fixtures; all claims, rights and benefits under contracts,
purchase orders or otherwise; all coverage under Seller's existing insurance
policies; all trade names and service marks and registrations and applications
therefor, trademarks, trademark applications and registrations, copyright
applications and registrations, patents and patent applications and
registrations; all trade secrets, know-how, licenses, processes, formulae,
royalties, customer lists and files, inventions, discoveries, improvements,
proprietary or technical information, computer hardware and software, data,
plans, specifications, drawings and the like; all memberships; all financial,
inventory, marketing, personnel, and other books and records, product literature
and advertising; governmental permits, approvals and authorizations; all
business records and plans; all licenses, assignments, secrecy and royalty
agreements relating to any proprietary rights or trade secrets; and
(i) all of the Assets reflected on the balance sheet of the Business as of
the Closing Date;
<PAGE>
(ii) Assets of a nature not normally reflected on a balance sheet in
accordance with generally accepted accounting principles which are used
primarily in or are primarily related to the Business; and
The Assets described above are referred to collectively as the "Seller's
Assets."
2. PAYMENT FOR SELLER'S ASSETS.
2.1 The total payment for the Seller's Assets shall be as follows:
2.1.1 CASH AND PROMISSORY NOTE. At the Closing, Purchaser will pay or
deliver to Seller the following as partial consideration for the Seller's
Assets:
(a) Two Hundred Thousand Dollars ($200,000.00) cash at closing;
(b) A promissory note duly executed by Purchaser in the principal
amount of One Hundred Thousand Dollars ($100,000.00), with no
stated interest, the entire principal of which shall be due and
payable six (6) months after the Closing Date.
2.1.2 VENTURI STOCK. As additional consideration for the Seller's
Assets, Purchaser shall issue to Seller One Hundred Sixty Thousand Four Hundred
Thirty Six (160,436) shares of Purchaser's authorized but unissued $0.001 par
value common stock (the "Venturi Shares").
(a) RESTRICTION ON RESALE. Except as provided below, Sellers shall
not, without the prior written consent of the Purchaser, offer
for sale, sell, pledge, hypothecate or otherwise dispose of,
directly or indirectly, any of the Shares, in any manner
whatsoever, whether pursuant to SEC Rule 144 or otherwise, prior
to the date that is two (2) years after the Closing Date;
provided however, that a certain number of Shares shall be
released from this restriction on the following schedule:
5% of the total initial amount of the Shares shall be released
each month during the thirteenth (13th) through sixteenth (16th)
month after the Closing Date;
8% of the total initial amount of the Shares shall be released
each month during the seventeenth (17th) through twenty-first
(21st) month after the Closing Date; and
10% of the total initial amount of the Shares shall be released
each month during the twenty-second (22nd) through twenty-third
(23rd) month after the Closing Date.
The certificates representing the Shares shall contain, for so
long as this
<PAGE>
restriction remains in effect, a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT BETWEEN THE
COMPANY AND THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE THAT THE SHARES MAY NOT BE OFFERED OR SOLD FOR A
CERTAIN PERIOD OF TIME AFTER THE DATE OF ISSUANCE.
(b) RESTRICTED STOCK. The Venturi Shares have not been registered
with the Securities and Exchange Commission, nor have the Venturi
Shares been qualified under the securities laws of any state. The
Seller acknowledges that the Venturi Shares are subject to the
following restriction which will be printed in the following form
on the certificates representing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE (THE
"LAW"). SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NEITHER SAID SHARES NOR ANY INTEREST THEREIN MAY BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION UNDER
THE LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO
SAID SALE OR OFFER.
(c) SELLER'S REPRESENTATIONS. Seller represents the following to
Purchaser in order to establish exemptions from registration
under Federal and state securities laws. Seller is acquiring the
Shares for its own account, for investment, and not for resale in
connection with any distribution thereof. Seller has such
knowledge and experience in business and financial matters that
it is capable of evaluating the risks of acquiring the Shares.
Seller understands the speculative nature of the Shares. Seller
has adequate net worth and means to provide for its current needs
and to sustain a complete loss of its investment. Seller has no
need of liquidity of its investment. Seller understands that at
present only a limited public market exists, and that a more
general public market may never exist, for the Shares and that
the Purchaser is under no obligation to provide a market for the
Shares.
(d) CONSENT TO DILUTION. Seller understands that Purchaser plans to
acquire
<PAGE>
other businesses and assets by issuing stock, and that Purchaser
may issue shares of its stock for other reasons in the future.
Seller understands and consents that future issuance of stock
will dilute Seller's proportionate ownership of Purchaser.
2.1.3 LIABILITIES UNDERTAKING. At the Closing Purchaser shall sign a
Liabilities Undertaking in the form of the attached Exhibit "A," pursuant to
which Purchaser agrees to pay or discharge the obligations set forth therein.
2.1.4 EMPLOYMENT OF PRINCIPAL. As partial consideration for Seller's
Assets, at the Closing the Purchaser shall enter into an Employment Agreement
with John T. Freeberg in a form acceptable to the Seller and the Purchaser.
3. CLOSING. The purchase and sale of the Seller's Assets (the "Closing")
provided for in this Agreement will take place at the offices of Venturi at 763
North 530 East, Orem, Utah 84097, at 10:00 a.m. (local time) on
________________, 1999, or such other place, time and date agreed to by the
Parties.
4. SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.
4.1 At the Closing, Seller shall deliver to Purchaser:
4.1.1 a Bill of Sale and Assignment signed by Seller in the form
attached as Exhibit "B";
4.1.2 any other instruments of assignment and transfer necessary to
vest in Purchaser good and marketable title to Seller's Assets;
4.1.3 all contracts and records relating to Seller's Assets; and
4.1.4 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and Seller must
sign and/or deliver any documents necessary to transfer and assign to Purchaser,
and confirm Purchaser's title to Seller's Assets, and to assist Purchaser in the
exercise of all rights thereto. After the Closing, Seller shall have access to
the books and records pertaining to its pre-closing operations.
4.3 Purchaser shall have the right to collect any receivables that may be
transferred to Purchaser under this Agreement and to endorse Seller's name on
checks received for such receivables. Seller shall transfer to Purchaser any
cash or other property Seller receives for such receivables.
5. REPRESENTATIONS AND WARRANTIES BY SELLER. Seller represents and warrant
to Purchaser as follows:
<PAGE>
5.1 ORGANIZATION, STANDING AND QUALIFICATION. Seller is a proprietorship
validly existing and in good standing under the laws of the State of Kentucky,
and doing business in the Louisville and Lexington areas of Kentucky under the
name Kentuckiana's Best Cleaning Co. and Kentucky's Best Cleaning Co.,
respectively. Seller has all requisite power and authority and is entitled to
carry on its business as now being conducted and to own, lease or operate its
properties as and in the places where such business is now conducted.
5.2 EXECUTION AND PERFORMANCE OF AGREEMENT; AUTHORITY. The performance of
this Agreement by Seller will not result in a default or breach of any other
agreement to which Seller is a party. Seller has the authority to enter into
this Agreement.
5.3 FINANCIAL STATEMENTS. The copies of the following financial statements
given to Purchaser and prepared by Seller (called the "Financial Statements")
are complete and correct, have been prepared from the records of Seller in
accordance with generally accepted accounting principles and fairly present the
financial condition of Seller as of their dates and the results of its
operations for the periods covered thereby:
5.3.1 unaudited profit and loss statement for the period April 2, 1999
through July 24, 1999.
Such profit and loss statement does not contain any items of special income or
any other income not earned in the ordinary course of business except as
specified therein, and such interim profit and loss statement includes all
adjustments, which consist only of normal recurring accruals, necessary for such
fair presentation.
5.4 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected on Schedule 5.4
or on the Financial Statements, as of the Financial Statement Date Seller had no
debts or obligations of any nature whatsoever, including any tax liabilities
incurred in respect of Seller's income, or its period prior to the close of
business on the Financial Statement Date or any other debts or obligations
relating to any act, omission or other condition which occurred or existed on or
before the Financial Statement Date.
5.5 TAXES. All taxes and assessments imposed by any taxing authority,
whether federal, state, local, foreign or otherwise which are due or payable by
Seller, and all interest and penalties thereon, have been paid in full. All tax
returns required to be filed have been accurately prepared and filed and all
deposits required to be made by Seller with respect to employees' withholding
taxes have been made.
5.6 ABSENCE OF CHANGES OR EVENTS. Between the Financial Statement Date and
the Closing Date, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of the
Company, and no event has occurred or circumstance exists that may result in
such a material adverse change.
5.7 LITIGATION. Except as may be set forth on Schedule 5.7, there is no
claim, order, investigation or other proceeding against Seller, its employees,
its properties, or business or the transactions contemplated by this Agreement,
and Seller knows of no basis for
<PAGE>
the same.
5.8 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the best of Seller's
knowledge Seller has complied with all laws applicable to its business. The
ownership and use of Seller's Assets as well as the conduct of its business will
not conflict with the rights of any other person or entity, and will not cause a
default under any agreement to which Seller is a party. Seller is not aware of
any proposed laws, condemnations or other proceedings which would affect its
business or Seller's Assets.
5.9 TITLE TO PROPERTIES. Seller has good title to Seller's Assets. None of
Seller's Assets are subject to any lien, lease, license, or adverse claim except
(i) as expressly set forth in the schedules attached to this Agreement, or (ii)
insubstantial imperfections of title which have arisen in the ordinary course of
business. To the best of Seller's knowledge, except as set forth in the
schedules attached to this Agreement, Seller's Assets are in good operating
condition and repair, are suitable for the purposes used, and are adequate for
all current operations of Seller.
5.10 ENVIRONMENTAL COMPLIANCE. To the best of Seller's knowledge: (a)
Seller's business is being operated in compliance with all environmental laws
and with all terms of required permits and licenses, (b) Seller is not aware of
any circumstances that may interfere with its compliance with environmental laws
or which may give rise to any liability, or which would otherwise form the basis
of any claim or investigation, and that is based on Seller's manufacture,
storage, disposal, transport, or handling, or the release into the environment,
of any hazardous substance, (c) there is no claim, investigation, or proceeding
pending or threatened against Seller, in connection with the Seller's Assets or
its business relating to environmental laws, and (d) Seller currently maintains
all material government permits, licenses and agreements required to operate
Seller's Assets and business, and has complied with all requirements relating
thereto.
5.11 SCHEDULES. Schedule 5.11 contains a complete list and description of:
5.11.1 All real property in which Seller has any ownership or other
interest and which is used in connection with the operation of its
business.
5.11.2 All equipment, motor vehicles, and other personal property
(other than inventory and supplies), owned or leased by Seller setting
forth a summary description of all leases, claims, and conditions relating
thereto.
5.11.3 All patents, trademarks, service marks, service names, trade
names, and copyrights together with any registrations, applications and
licenses related thereto, owned by Seller or used in the operation of
Seller's business.
5.11.4 All insurance policies insuring Seller or its assets,
specifying the name of the insurer, the risk insured against, the limits of
coverage, the deductible amount, the premium rate and the date through
which coverage will continue by virtue of premiums already paid.
<PAGE>
5.11.5 All contracts or agreements relating to the Assets to which
Seller are a party.
5.11.6 All employment and consulting agreements, compensation plans,
pension plans or retirement plans, group life, health and accident
insurance and other employee benefit plans, including holiday, vacation,
Christmas and other bonus practices, to which Seller is a party.
To the best of Seller's knowledge, all of the agreements, leases and licenses
required to be listed on Schedule 5.11 (other than those which have been fully
performed) are valid and binding. Except as disclosed in Schedule 5.11, no
payment required to be made under any such agreement, lease or license has been
prepaid more than 30 days prior to its due date, and there is not any default,
or event which would constitute a default, and none of such agreements, leases
or licenses is unduly burdensome or adverse to Seller's Assets or business or
likely to result in any material loss or liability. None of Seller's existing or
completed contracts is subject to renegotiation with any government body.
5.12 NO GUARANTIES. No obligation of Seller is guaranteed by any other
person or entity, nor has Seller guaranteed any obligation of any other person
or entity.
5.13 RECEIVABLES. All Seller's receivables have arisen only from
transactions in the ordinary course of business and are collectible within 90
days after each receivable arose, without offset or resort to litigation.
5.14 RECORDS. The accounting books of Seller are complete and correct, and
to the best of Seller's knowledge, no transactions which are required to be
recorded therein have been omitted.
5.16 DISCLOSURE. All of Seller's representations made in this Agreement and
its related documents are true and contain no untrue statements and do not omit
important facts. Seller has disclosed to Purchaser in writing all the adverse
facts concerning the Seller's Assets and its business.
5.17 NO CONFLICT. To the best of Seller's knowledge, performance of this
Agreement by Seller will not conflict with any regulations or agreements to
which Seller is a party. No authorization or filing, which has not already been
completed, is necessary for Seller to perform this Agreement.
6. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller as follows:
6.1 ORGANIZATION. Purchaser is a corporation organized and in good standing
under the laws of the State of Nevada and has full authority to enter into this
Agreement and to carry on its business and to own and operate its properties.
6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. All actions required to be
taken by Purchaser relating to the signing of this Agreement shall have been
taken at or prior to the Closing.
<PAGE>
6.3 EXECUTION AND PERFORMANCE OF AGREEMENT. The performance of this
Agreement by Purchaser will not result in a default of any Agreement to which
Purchaser is a party. Purchaser has the authority to enter into this Agreement.
6.4 LITIGATION. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. CONDUCT OF BUSINESS PRIOR TO CLOSING.
7.1 Prior to the Closing, Seller shall conduct its business only in a
manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of Seller intact, (ii) to keep available the services
of Seller's present employees, agents and independent contractors, (iii) to
preserve the goodwill of Seller's suppliers, customers, landlords and others
having business relations with it, and (iv) to cooperate with Purchaser and
assist in obtaining the consent of any party to any lease or contract with
Seller where the consent of such party may be required by reason of this
Agreement.
7.2 If there is a change in any information contained in this Agreement or
its related documents prior to closing, Seller shall give Purchaser prompt
written notice.
7.3 Seller shall consult with and follow the recommendations of Purchaser
with respect to (i) canceling agreements to which Seller is a party, including
purchase orders and commitments for capital expenditures or improvements, (ii)
discontinuing particular items or operations and (iii) purchasing, pricing or
selling policy (including offering services at discounts); provided, however,
that nothing contained in this Section shall require Seller to take action that
is likely to result in a penalty or claim for damages against Seller, or in
losses to Seller, or to interfere with the conduct of Seller's business
consistent with prior practice, or to result in a breach by Seller of any of its
representations contained in this Agreement (unless the breach is waived by
Purchaser).
8. ACCESS TO INFORMATION AND DOCUMENTS. Upon Purchaser's request, Seller
shall give Purchaser access to Seller's personnel and all its properties,
documents and records and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same prior to the
Closing.
9. EMPLOYMENT MATTERS.
9.1 Purchaser shall offer employment to those current employees of Seller
that are listed on Schedule 5.11.6 attached hereto, at the compensation listed
on Schedule 5.11.6.
9.2 Within a reasonable period following the Closing Date Purchaser shall
provide training and support to Seller's employees to enable them to use and
sell Purchaser's products and services.
<PAGE>
10. BULK SALES COMPLIANCE. Purchaser waives Seller's compliance with the
Bulk Sales Law of any state. Seller agrees to pay all claims of creditors which
could be asserted against Purchaser because of such noncompliance unless such
claims are assumed by Purchaser under this Agreement. Seller shall indemnify
Purchaser against any liability or expense, including attorneys' fees, incurred
by Purchaser by reason of the failure of Seller to pay such claims.
11. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All obligations of
Purchaser under this Agreement are subject to, at Purchaser's option, each of
the following conditions at or prior to the Closing, and Seller shall use its
best efforts to cause each condition to be fulfilled:
11.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
11.2 All duties required by this Agreement to be performed by Seller at or
before the Closing shall be performed.
11.3 Since the date of this Agreement there shall be no material adverse
change in the condition of Seller's Assets or its business.
11.4 All documents required to be delivered to Purchaser at or prior to the
Closing shall be delivered.
12. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. All obligations of Seller
at the Closing are subject to, at Seller's option, each of the following
conditions at or prior to the Closing, and Purchaser shall use its best efforts
to cause each condition to be fulfilled:
12.1 All representations of Purchaser contained in this Agreement or the
related documents shall be correct when made and as of the Closing.
12.2 All duties required by this Agreement to be performed by Purchaser at
or before the Closing shall be performed.
13. INDEMNIFICATION.
13.1 Seller indemnifies and agrees to hold Purchaser harmless from:
13.1.1 any loss suffered by Purchaser because a representation was not
true, a warranty was breached or a duty was not performed by Seller
contained in this Agreement or a related document;
13.1.2 any loss suffered by Purchaser in connection with any of
Seller's liabilities which are not assumed by Purchaser under the
Liabilities Undertaking;
<PAGE>
13.1.3 any liabilities or debts of Seller, which exist as of the
Closing Date or which arise after that date but which are based upon any
transaction, state of facts or other condition which occurred on or before
the Closing, except to the extent reflected on the schedules attached to
this Agreement;
13.1.4 any liabilities or debts of Seller, which exist as of the
Closing Date or which arise after that date but which are based upon any
transaction, state of facts or other condition which occurred on or before
the Closing Date, except to the extent (i) reflected on the schedules
attached to this Agreement or incurred in connection with a purchase in the
ordinary course of Seller's business and in conformity with the
representations contained in this Agreement, and (ii) assumed by Purchaser
under the terms of the Liabilities Undertaking; and
13.1.5 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the
same or for enforcing this indemnity.
13.2 Purchaser hereby agrees to indemnify and hold Seller harmless from:
13.2.1 any loss suffered by Seller because a representation was not
true, a warranty was breached or a duty was not performed by Purchaser
contained in this Agreement or a related document;
13.2.2 any liabilities or debts of Seller assumed by Purchaser under
this Agreement or the Liabilities Undertaking; and
13.2.3 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the
same or for enforcing this indemnity.
14. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement shall survive the
Closing.
15. NOTICES. Any notices described under this Agreement shall be in writing
and shall be deemed given when personally delivered or mailed by first class
registered mail, return receipt requested, addressed to the parties at the
addresses set forth above.
16. ARBITRATION.
16.1 Any action, dispute, controversy or claim between or among the
Parties, whether sounding in contract, tort, or otherwise ("Dispute") shall, at
the request of any Party, be finally resolved by arbitration as set forth below,
and shall include any Dispute arising out of or relating to this Agreement or
any agreements or instruments relating to this Agreement or delivered in
connection with this Agreement. Any such Dispute shall be determined by
arbitration in accordance with the Commercial Arbitration Rules of the
<PAGE>
American Arbitration Association. The arbitration proceedings shall be conducted
in Salt Lake City, Utah. The arbitrator(s) shall have the qualifications set
forth in Section 16.2. All defenses and statutes of limitation which would
otherwise be applicable in a judicial action brought by a Party shall apply to
any arbitration proceeding under this Agreement.
16.2 The arbitrator(s) shall be selected in accordance with the rules
of the American Arbitration Association from panels maintained by the
Association. A single arbitrator shall be knowledgeable in the subject matter of
the arbitration proceeding. If more than one arbitrator is selected, at least
one of the arbitrators must be knowledgeable in the subject matter of the
Dispute and at least one of whom must be a practicing attorney. If more than one
arbitrator is selected, the controversy shall be decided by a majority vote of
the arbitrators. The arbitrator(s) may award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrators' fees, and court
costs) to the prevailing party. The arbitrator(s) also may grant provisional or
ancillary remedies such as, for example, injunctive relief, attachment, or the
appointment of a receiver, either during the pendency of the arbitration
proceeding or as part of the arbitration award.
16.3 Notwithstanding the applicability of other law to any agreements
or instruments between or among the Parties, the Federal Arbitration Act, 9
U.S.C. Sec. 1 ET SEQ. shall apply to the construction and interpretation of this
Agreement.
16.4 The Parties acknowledge that they have read and understand the
following disclosures:
ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT,
INCLUDING THEIR RIGHT TO A JURY TRIAL.
PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND DIFFERENT
FROM COURT PROCEEDINGS.
ARBITRATORS' AWARDS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS
OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULINGS BY ARBITRATORS IS STRICTLY LIMITED.
17. LEGAL AND OTHER COSTS. In the event that any party defaults in its
obligations under this Agreement and, as a result thereof, another party seeks
to legally enforce its rights hereunder against the defaulting party, then, in
addition to all damages and other remedies to which the non-defaulting party is
entitled by reason of such default, the defaulting party shall be liable for and
shall promptly pay to the non-defaulting party an amount equal to all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the
non-defaulting party in connection with such enforcement to the extent awarded
by arbitration.
18. MISCELLANEOUS.
<PAGE>
18.1 This writing contains the entire agreement of the parties concerning
the subject matter hereof and it may not be amended or terminated except by a
written agreement signed by all the parties.
18.2 No waiver of any default is valid unless in writing and signed by the
waiving party, and no such waiver shall be deemed a waiver of any subsequent
default.
18.3 This Agreement shall be binding upon and inure to the benefit of each
corporate party, its successors and assigns, and each individual party hereto
and his/her heirs, personal representatives, successors and assigns.
18.4 The paragraph headings are for the purposes of convenience only and
are not intended to define or limit the contents of the paragraphs.
18.5 Each party shall cooperate and take such further action as may be
reasonably requested by any other party to carry out the provisions and purposes
of this Agreement.
18.6 This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
18.7 This Agreement and any amendments shall be governed by and construed
in accordance with law of the State of Utah.
18.8 Any information revealed pursuant to this Agreement or previously in
the course of negotiations shall be held in confidence and solely for the
purpose of consummating this Agreement in allowing the parties to exercise
prudent care. If this Agreement is not consummated, no further use shall be made
of such information (except to the extent such information was already known
prior to this Agreement) and the parties may be held accountable for any
unauthorized use. If this Agreement is not consummated, the parties shall return
all documents received from any party in connection with this Agreement. If this
Agreement is consummated, neither party shall disclose any information
concerning the other party's business or the terms of this Agreement except (i)
as approved by the other party, (ii) as necessary for the conduct of the
Purchaser's or Seller's business, (iii) as required by law, or (iv) as is
ascertainable from public information.
18.9 Each provision of this Agreement shall be interpreted in such a way as
to be valid under all laws, but in case any of the provisions shall be held to
be illegal or unenforceable, such illegality or unenforceability shall not
affect any other provision and this Agreement shall be interpreted as if the
invalid provision was not included unless the absence of such provision would
make completing the transactions contemplated hereby unreasonable.
18.10 Either party shall have fifteen (15) days from receipt of a written
notice to cure any default hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
<PAGE>
SELLER:
----------------------------------------
Jon T. Freeberg
dba Kentuckiana's Best Cleaning Co. and Kentucky's
Best Cleaning Company
----------------------------------------
Bridget E. Freeberg
dba Kentuckiana's Best Cleaning Co. and Kentucky's
Best Cleaning Co.
PURCHASER:
VENTURI TECHNOLOGIES, INC.,
a Nevada corporation
By:
--------------------------------------
Its:
---------------------------------
<PAGE>
EXHIBIT "B"
BILL OF SALE
<PAGE>
Schedule 5.4
Liabilities
1. Two office leases for Seller's principal places of business in Louisville
and Lexington.
2. Purchaser shall pay to Seller, within 30 days after the Closing, the amount
that Seller prepaid to Advo for advertising prior to the Closing for
advertising that did not occur until after the Closing.
3. All utility deposits paid by Seller shall be returned to Seller after
Purchaser puts the utilities into Purchaser's name.
4. Purchaser shall assume Seller's obligations under Seller's contract with
Valpak for advertising services.
<PAGE>
Schedule 5.7
Litigation
Seller is aware of a potential claim by a customer named Vozzo relating to
damage to a couch. Seller is not aware of any other litigation, claim or
potential claim.
<PAGE>
Schedule 5.11
Schedules of Assets, Contracts, etc.
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made and entered into as of September __,
1999, by and between VENTURI TECHNOLOGIES, INC., a Nevada corporation ("Buyer"),
and JEFFERY L. LEAVITT ("Seller").
RECITALS
A. Seller owns all of the issued and outstanding capital stock (the
"Shares") of J.L.L.C., Inc., a Utah corporation transacting business under the
name Leavitt Restoration Services (the "Company").
B. Seller desires to sell, and Buyer desires to purchase, all of the Shares
for the consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing, Seller will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Seller. Buyer acknowledges and
agrees that at or prior to the Closing, the Company shall transfer to the
Seller, a 1997 Toyota truck (VIN No. ________________), together with all debts,
obligations and liabilities related to such truck.
1.2 PURCHASE PRICE.
1.2.1 VENTURI SHARES. As consideration for the Shares of the Company,
Buyer shall issue to Seller twenty five thousand (25,000) shares of Buyer's
authorized but unissued $0.001 par value common stock (the "Venturi Shares").
1.2.2 RESTRICTED STOCK. The Shares issued to Seller under this
Agreement have not been registered with the Securities and Exchange Commission,
nor have the Shares been qualified under the securities laws of any state. The
Seller acknowledges that the Shares are subject to the following restriction
which will be printed in the following form on the certificates representing the
Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES HAVE BEEN
<PAGE>
ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY INTEREST THEREIN
MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION UNDER THE LAW OR
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE OR OFFER.
Seller represents the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Seller is acquiring
the Shares for his own account, for investment, and not for resale in connection
with any distribution thereof. Seller has such knowledge and experience in
business and financial matters that he is capable of evaluating the risks of
obtaining the Shares. Seller understands the speculative nature of the Shares.
Seller has adequate net worth and means to provide for his current needs and to
sustain a complete loss of his investment. Seller has no need of liquidity of
his investment. Seller understands that at present no public market exists, and
that a public market may never exist, for the Shares and that the Purchaser is
under no obligation to provide a market for the Shares.
1.2.3 RESTRICTION ON RESALE. Except as provided below, Seller shall
not, without the prior written consent of the Purchaser, offer for sale, sell,
pledge, hypothecate or otherwise dispose of, directly or indirectly, any of the
Shares, in any manner whatsoever, whether pursuant to SEC Rule 144 or otherwise,
prior to the date that is two (2) years after the Closing Date; provided
however, that a certain number of Shares shall be released from this restriction
on the following schedule:
5% of the total initial amount of the Shares shall be released
each month during the thirteenth (13th) through sixteenth (16th)
month after the Closing Date;
8% of the total initial amount of the Shares shall be released
each month during the seventeenth (17th) through twenty-first
(21st) month after the Closing Date; and
10% of the total initial amount of the Shares shall be released
each month during the twenty-second (22nd) through twenty-third
(23rd) month after the Closing Date.
The certificates representing the Shares may contain, for so long as this
restriction remains in effect, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT BETWEEN THE COMPANY AND
THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE THAT THE
SHARES MAY NOT BE OFFERED OR SOLD FOR A
<PAGE>
CERTAIN PERIOD OF TIME AFTER THE DATE OF ISSUANCE.
1.2.4 CONSENT TO DILUTION. Seller understands that Purchaser plans to
acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Seller understands
and consents that future issuances of stock will dilute Seller's proportionate
ownership of Purchaser.
1.2.5 EMPLOYMENT OF OWNERS. As partial consideration for the Shares, at
the Closing the Purchaser shall enter an employment agreement with Jeffery L.
Leavitt, which employment agreement shall be in a form acceptable to the Seller
and the Purchaser.
1.3 CLOSING. The purchase and sale of the Shares (the "Closing") provided
for in this Agreement will take place at the offices of Venturi at 763 North 530
East, Orem, Utah 84097, at 10:00 a.m. (local time) on September 30, 1999, or
such other place, time and date agreed to by the Parties.
1.4 CLOSING DELIVERIES.
1.4.1 SELLER'S DOCUMENTS. At the Closing, Seller will deliver to
Buyer:
(a) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers); and
(b) employment agreement in the form of Exhibit ___, executed by
Seller (the "Employment Agreement").
1.4.2 BUYER'S DOCUMENTS. At the Closing, Buyer will deliver to Seller:
(a) a certificate representing twenty five thousand (25,000) shares of
Buyer's $0.001 par value common stock; and
(b) the Employment Agreement, executed by Buyer.
2. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. (a) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Utah, with full corporate power and authority to conduct its business as it is
now being conducted, to own or use the properties and assets that it purports to
own or use, and to perform all its obligations under applicable contracts. The
Company is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
<PAGE>
2.2 AUTHORITY. This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
Upon the execution and delivery by Seller of this Agreement and the Employment
Agreement (collectively, the "Seller's Closing Documents"), the Seller's Closing
Documents will constitute the legal, valid, and binding obligations of Seller,
enforceable against Seller in accordance with their respective terms. Seller has
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver the Seller's Closing Documents and to perform their obligations
under the Seller's Closing Documents.
2.3 NO CONFLICT. Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the contemplated transactions by
Seller will violate or constitute a default under any mortgage, indenture, deed
of trust, lease, contract, agreement, license or other instrument or any order,
judgement or ruling of any governmental authority to which the Seller is
subject, or to the best knowledge of Seller, any of the property of the Company
is bound, or result in the creation of any mortgage, pledge, lien, charge or
encumbrance upon any of the assets of the Company or the loss of any license or
other contractual right with respect thereto, except in each case for any of the
foregoing which is not, individually or in the aggregate, material to the
Company.
Except as may be set forth in Schedule 2.3, neither the Seller nor the
Company is or will be required to give any notice to or obtain any consent from
any person in connection with the execution and delivery of this Agreement or
the consummation or performance of the transaction contemplated hereby.
Seller is acquiring the Shares for his own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
Seller is an "accredited investor" as such term is defined in Rule 501(a) under
the Securities Act of 1933, as amended, (the "Securities Act") and the rules and
regulations promulgated thereunder.
2.4 CAPITALIZATION. The authorized capital stock of the Company consists of
50,000 shares of common stock, no par value per share, of which 10,000 shares
are issued and outstanding and constitute the Shares. The Company never issued
stock certificates, and the Shares are consequently not evidenced by
certificates. Seller is and will be on the Closing Date the record and
beneficial owner and holder of all of the Shares, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
state law regulating the sale and issuance of securities. The Company does not
own, nor does it have any Contract to acquire, any equity securities or other
securities of any other business or any direct or indirect equity or ownership
interest in any other business.
<PAGE>
2.5 FINANCIAL STATEMENTS. Seller have delivered to Buyer unaudited balance
sheets of the Company as of June 30 in each of the years 1996, 1997 and 1998
(the "Balance Sheet"), and the related unaudited statements of income for each
of the fiscal years then ended. Such financial statements and notes fairly
present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the balance
sheet); the financial statements referred to in this Section reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements. No
financial statements of any person or entity other than the Company are required
by GAAP to be included in the consolidated financial statements of the Company.
2.6 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company. At the Closing, all of those books and records will be in the
possession of the Company.
2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Seller has delivered to Buyer a
complete and accurate list of all real and personal property interests owned by
the Company. The Company owns all the properties and assets that have been
disclosed to Buyer. All material properties disclosed as being owned by the
Company are owned free and clear of all liens and encumbrances except as
previously disclosed in writing to Buyer.
2.8 CONDITION AND SUFFICIENCY OF ASSETS. To the best of Seller's knowledge,
except as set forth in Schedule 2.8, the Company's property and assets are in
good operating condition and repair, and are adequate for the uses to which they
are being put, and none of such property and assets are in need of maintenance
or repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The property and assets of the Company are
sufficient for the continued conduct of the Company's business after the Closing
in substantially the same manner as conducted prior to the Closing.
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected in the accounting records of The Company as of the Closing Date
(collectively, the "Accounts Receivable") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. To the best of Seller's knowledge, unless paid prior to the Closing
Date, the Accounts Receivable are or will be as of the Closing Date current and
collectible. Absent any unforeseen events, each of the Accounts Receivable
historically has been collected in full within ninety days after the day on
which it first becomes
<PAGE>
due and payable. Except as may be set forth on Schedule 2.10 referred to below,
there is not any pending, or to Seller's knowledge threatened, contest or claim
challenging the validity of any of the Accounts Receivable.
2.10 NO UNDISCLOSED LIABILITIES. Except as may be set forth in Schedule
2.10, the Company has no liabilities or obligations of any nature (whether known
or unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the ordinary course of business.
2.11 TAXES. To the best of Seller's knowledge the Company has filed or
caused to be filed within the past five (5) years all tax returns that are or
were required to be filed by or with respect to the Company, pursuant to
applicable laws and regulations. Seller has delivered or made available to Buyer
copies of all such tax returns filed since 1997. To the best of Seller's
knowledge, all tax returns filed by the Company are true, correct, and complete.
2.12 NO MATERIAL ADVERSE CHANGE. To the best of Seller's knowledge, since
the date of the Balance Sheet, there has not been any material adverse change in
the business, operations, properties, prospects, assets, or condition of the
Company, and no event has occurred or circumstance exists that may result in
such a material adverse change.
2.13 CONTRACTS AND EMPLOYEE BENEFITS. Except as may be set forth in
Schedule 2.13, the Company is not a party to any contract or agreement that
involves annual payments by the Company in excess of $25,000, other than in the
ordinary course of business. The consummation of the transaction contemplated
herein will not result in the termination of any material agreement or contract
to which the Company is a party, nor give any party thereto the right to cancel
or terminate any such contract or agreement.
2.14 ERISA. The Company has never offered to its employees any pension,
profit sharing, 401k plan or other employee benefit plan as defined in the
Employee Retirement Income Security Act of 1974 ("ERISA").
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as may be set forth on
Schedule 2.15, the Company has not received any notice of any violation of any
laws or regulations that are or were applicable to it or to the conduct or
operation of its business or the ownership or use of any of its assets, which
violation has not been cured as of the Closing Date, and to the best knowledge
of Seller, the Company is in full compliance with all such laws or regulations.
2.16 GOVERNMENTAL AUTHORIZATIONS. The Company has obtained all governmental
authorizations and permits that are necessary to permit the Company to lawfully
conduct and operate its business in the manner currently conducted.
2.17 LEGAL PROCEEDINGS. Except as disclosed in Schedule 2.17, there is no
material lawsuit or legal or administrative or regulatory proceeding or
investigation pending against the Company or, to the best knowledge of Seller,
threatened against the Company.
<PAGE>
2.18 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as may be set forth in
Schedule 2.18, since the date of the Balance Sheet, the Company has conducted
its business only in the ordinary course of business and there has not been any:
(a) change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of
the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the organizational documents of the Company;
(c) payment or increase by the Company of any extraordinary bonuses,
salaries, or other compensation to any stockholder, director, officer,
or (except in the ordinary course of business) employee or entry into
any employment, severance, or similar contract with any director,
officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) material damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial
condition, or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any contract or
transaction involving a total remaining commitment by or to the
Company of at least $25,000;
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $25,000; or
(i) material change in the accounting methods used by the Company.
2.19 INSURANCE. The Company maintains policies of insurance in such
amounts, with such deductibles and against such risks and losses as are, in its
judgment, reasonable for the business and assets of the Company, and Seller will
deliver to Buyer on the Closing Date
<PAGE>
certificates of insurance setting forth the name of the insurance company,
policy number and type of coverage of all insurance policies maintained as of
the date hereof with respect to the Company's business operations, property,
plant and equipment.
2.20 ENVIRONMENTAL MATTERS. There are no pending or, to the knowledge of
Seller and the Company, threatened claims, encumbrances, or other restrictions
of any nature, resulting from any environmental, health, and safety liabilities
or arising under or pursuant to any environmental law, with respect to or
affecting any of the operations, properties and assets (whether real, personal,
or mixed) in which Seller or the Company has or had an interest.
2.21 DISCLOSURE. No representation or warranty of Seller in this Agreement
and no statement in the Schedules attached to this Agreement omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading. There is no fact
known to either Seller that has specific application to either Seller or the
Company (other than general economic or industry conditions) and that materially
adversely affects or, as far as either Seller can reasonably foresee, materially
threatens, the assets, business, prospects, financial condition, or results of
operations of the Company (on a consolidated basis) that has not been set forth
in this Agreement or the Schedules attached hereto.
2.22 BROKERS OR FINDERS. Seller has incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada.
3.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the legal, valid,
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms. Upon the execution and delivery by Buyer of this Agreement and the
Employment Agreement (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver the Buyer's Closing Documents and to perform
its obligations under the Buyer's Closing Documents. Except as set forth in
Schedule 3.2, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated hereby will
give any person the right to prevent, delay, or otherwise interfere with any of
the transactions contemplated hereby pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
shareholders of
<PAGE>
Buyer;
(iii) any legal requirement or order to which Buyer may be subject; or
(iv) any contract to which Buyer is a party or by which Buyer may be
bound.
Except as set forth in Schedule 3.2, Buyer is not and will not be required
to obtain any consent from any person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
transactions contemplated hereby.
3.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
3.4 CERTAIN PROCEEDINGS. There is no pending legal proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby. To Buyer's knowledge, there exist no grounds
for such proceeding, nor has any such proceeding been threatened.
3.5 BROKERS OR FINDERS. Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Seller harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
4. COVENANTS OF SELLER PRIOR TO CLOSING DATE
4.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Seller will, and will cause the Company and its representatives
to, (a) afford Buyer and its representatives and prospective lenders and their
representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel, properties, contracts, books and records, and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
4.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the date
of this Agreement and the Closing Date, Seller will, and will cause the Company
to:
(a) conduct the business of the Company only in the ordinary course of
business;
(b) use best efforts to preserve intact the current business organization
of the Company, keep available the services of the current officers,
employees, and agents of the Company, and maintain the relations and good
will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company;
<PAGE>
(c) confer with Buyer concerning operational matters of a material nature;
and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of the Company.
4.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any material change in the business of the
Company is likely to occur.
4.4 REQUIRED APPROVALS. As promptly as practicable after the date of this
Agreement, Seller will, and will cause the Company to, make all reports and
filings required by applicable laws and regulations to be made by them in order
to consummate the transactions contemplated hereby. Between the date of this
Agreement and the Closing Date, Seller will, and will cause the Company to, (a)
cooperate with Buyer with respect to all filings that Buyer elects to make or is
required by applicable laws and regulations to make in connection with the
transactions contemplated hereby, and (b) cooperate with Buyer in obtaining all
consents necessary or appropriate to consummate the transactions contemplated
hereby.
4.5 NOTIFICATION. Between the date of this Agreement and the Closing Date,
the Seller will promptly notify Buyer in writing if the Seller or the Company
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Seller's representations and warranties as of the date of this Agreement,
or if the Seller or the Company becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in this Agreement or the Schedules attached
to this Agreement, Seller will promptly deliver to Buyer a supplement to this
Agreement or the Schedules attached hereto specifying such change. During the
same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Seller in this Section or of the occurrence of any
event that may make the satisfaction of the conditions to closing set forth in
this Agreement impossible or unlikely.
4.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Seller will cause all indebtedness owed to the
Company by either Seller or any related person of either Seller to be paid in
full prior to Closing.
4.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated, Seller will not, and will cause the Company and each of their
representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any person (other than Buyer) relating to any transaction
involving the sale
<PAGE>
of the business or assets (other than in the ordinary course of business) of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company.
4.8 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Seller will use his best efforts to cause the conditions to closing set forth in
this Agreement to be satisfied.
5. COVENANTS OF BUYER PRIOR TO CLOSING DATE
5.1 APPROVALS OF GOVERNMENTAL AUTHORITIES. As promptly as practicable after
the date of this Agreement, Buyer will make all filings and obtain all consents
required by applicable laws and regulations in order to consummate the
transactions contemplated hereby.
5.2 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Buyer will use its best efforts to cause the conditions in Sections 6 and 7 to
be satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Seller's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
6.2 SELLER'S PERFORMANCE. All of the covenants and obligations that Seller
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects. Seller must have delivered each of the
documents required to be delivered by Seller pursuant to this Agreement.
6.3 CONSENTS. Each of the consents required to consummate the transactions
contemplated hereby must have been obtained and must be in full force and
effect.
6.4 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been commenced or threatened against Buyer, or against any person affiliated
with Buyer, any proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions contemplated hereby, or
(b) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the transactions contemplated hereby.
6.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have
<PAGE>
been made or threatened by any person any claim asserting that such person (a)
is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in the Company, or (b) is entitled to all or any portion of
the purchase price payable for the Shares.
6.6 NO PROHIBITION. Neither the consummation nor the performance of any of
the transactions contemplated hereby will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any person affiliated with
Buyer to suffer any material adverse consequence under, any applicable laws or
regulations.
7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Shares and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects. Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 1.4.2 and must have made
the cash payments required to be made by Buyer pursuant to Section 1.4.2.
7.3 CONSENTS. All of the consents required to be obtained from Buyer must
have been obtained and must be in full force and effect.
7.4 NO PROHIBITION. Neither the consummation nor the performance of any of
the transactions contemplated hereby will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Seller or any person affiliated with
Seller to suffer any material adverse consequence under, any applicable laws or
regulations.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer or Seller if a material breach of any provision of this
Agreement
<PAGE>
has been committed by the other party and such breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 6 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply
with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by Seller, if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of Seller to comply with their obligations under this
Agreement) and Seller has not waived such condition on or before the
Closing Date; or
(c) by mutual consent of Buyer and Seller.
8.2 EFFECT OF TERMINATION. Each party's right of termination under Section
8.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 8.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 10.1 and 10.2 will survive; provided, however, that if
this Agreement is terminated by a party because of the breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement and
the Schedules attached hereto, will survive the Closing. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will indemnify
and hold harmless Buyer, the Company, and their respective representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim
<PAGE>
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any and all loss, liability or damage suffered or incurred by Buyer in
respect of any debt, obligation or liability of the Company or of Seller
not disclosed in this Agreement, any of the Schedules attached hereto, or
in writing to Buyer prior to the Closing Date;
(b) any breach of any representation or warranty made by Seller in this
Agreement, the Schedules attached hereto, or any other certificate or
document delivered by Seller pursuant to this Agreement;
(c) any breach of any representation or warranty made by Seller in this
Agreement as if such representation or warranty were made on and as of the
Closing Date;
(d) any Breach by Seller of any covenant or obligation of Seller in this
Agreement;
(e) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to
have been made by any such Person with either Seller or the Company (or any
person acting on their behalf) in connection with any of the transactions
contemplated hereby.
The remedies provided in this Section 9.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify
and hold harmless Seller, and will pay to Seller the amount of any damages
arising, directly or indirectly, from or in connection with (a) any breach of
any representation or warranty made by Buyer in this Agreement or in any
certificate delivered by Buyer pursuant to this Agreement, (b) any breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
person with Buyer (or any person acting on its behalf) in connection with any of
the transactions contemplated hereby.
10. GENERAL PROVISIONS
10.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
<PAGE>
10.2 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the transactions contemplated hereby, unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, or (c) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. If the transactions contemplated hereby are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
10.3 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: Jeffery L. Leavitt
2324 Pendelton Way
South Jordan, Utah 84095
Buyer: Venturi Technologies, Inc.
763 North 530 East
Orem, Utah 84097
Attn: Gaylord M. Karren, Chairman and CEO
Phone: (801) 235-9552
Fax: (801) 235-1731
(With a copy to Randy K. Johnson, Chief Counsel)
10.4 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of Utah,
County of Salt Lake, or, if it has or can acquire jurisdiction, in the United
States District Court for the Central District of Utah, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
<PAGE>
10.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
10.6 WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
10.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
10.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other parties, except that Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
10.9 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
<PAGE>
10.10 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Utah without regard to conflicts of laws principles.
11.14 TAX ELECTIONS. Seller acknowledge that the Buyer may, in its sole
discretion, make certain tax elections with respect to this transaction,
including, but not necessarily limited to, an election under Section 338 of the
Internal Revenue Code of 1986, as amended, to treat this transaction for tax
purposes as though it were a purchase and sale of assets rather than stock.
11.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
VENTURI TECHNOLOGIES, INC.
By:
--------------------------------------
Its:
----------------------------------
SELLER:
-----------------------------------------
Jeffery L. Leavitt
<PAGE>
STOCK PURCHASE AGREEMENT
(All Fours)
This STOCK PURCHASE AGREEMENT is made as of February 1, 2000, by VENTURI
TECHNOLOGIES, INC., a Nevada corporation ("Buyer"), and MITCHELL J. MARTIN
("Martin") and LLOYD E. PETERMAN ("Peterman") (Martin and Peterman are
collectively referred to as "Sellers").
RECITALS
A. Sellers equally own all of the issued and outstanding capital stock
(the "Corporate Shares" or "Shares") of ALL FOURS DISTRIBUTING, INC., a
Colorado corporation (hereinafter referred to as either "All Fours" or the
"Company").
B. Sellers desire to sell, and Buyer desires to purchase, all of the
Corporate Shares (hereinafter "Shares") for the consideration and on the
terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing, Sellers will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Sellers.
1.2 PURCHASE PRICE; INCLUSIONS.
1.2.1 CASH AND PROMISSORY NOTE. At the Closing, Buyer will pay or
deliver to Sellers the following as partial consideration for the Shares of the
Company:
(a) One Hundred Fifty-Three Thousand dollars ($153,000.00) cash at
closing;
(b) A promissory note duly executed by Buyer in the principal amount of
Three Hundred Six Thousand Dollars ($306,000.00), in the form and
pursuant to the terms of Exhibit K, attached hereto ("Installment
Promissory Note"),
(c) The "Balloon Note", as referred within Paragraph 1.3.1(c) of the MPI
of Colorado, Inc. Stock Purchase Agreement, of which $75,000 has been
allocated to principal for the certificate of All Fours Shares.
<PAGE>
1.2.2 VENTURI STOCK. As additional consideration for the Shares,
Buyer shall issue to Sellers Ninety-One Thousand Five Hundred (91,500) shares of
Buyer's authorized but unissued $0.001 par value common stock. Said shares shall
be evidenced by two (2) separate certificates in the amount of 45,750 shares
issued to each of the Sellers individually.
1.2.3 ESCROW AND CERTIFICATES. The Venturi Shares shall be subject
to forfeiture if Sellers breach certain of the representations or warranties in
this Agreement, or if certain of the representations made by Sellers in this
Agreement turn out to be untrue, as shall be more fully set forth in the
Restated Global Escrow Agreement, as amended. The Venturi Shares shall be held
by Escrow Agent pursuant to the terms of the Restated Global Escrow Agreement,
as amended. The certificates representing the Venturi Shares shall contain, for
so long as the Venturi Shares are held in escrow, a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE AND
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT
BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE THAT THE SHARES MAY NOT BE OFFERED OR SOLD FOR A
CERTAIN PERIOD OF TIME AFTER THE DATE OF ISSUANCE.
1.2.4 RESTRICTED STOCK. The Venturi Shares have not been registered
with the Securities and Exchange Commission, nor have the Venturi Shares been
qualified under the securities laws of any state. The Sellers acknowledge that
the Venturi Shares are subject to the following restriction which will be
printed in the following form on the certificates representing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY INTEREST
THEREIN MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION
UNDER THE LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE
OR OFFER.
Sellers represent the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Sellers are acquiring
the Shares for their own
<PAGE>
account, for investment, and not for resale in connection with any distribution
thereof. Sellers have such knowledge and experience in business and financial
matters that they are capable of evaluating the risks of obtaining the Shares.
Sellers understand the speculative nature of the Shares. Sellers have adequate
net worth and means to provide for their current needs and to sustain a complete
loss of their investment. Sellers have no need of liquidity of their investment.
Sellers understand that at present only a limited public market exists, and that
a more general public market may never exist, for the Shares and that the
Purchaser is under no obligation to provide a market for the Shares.
1.3 CONSENT TO DILUTION. Sellers understand that Purchaser plans to
acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Sellers understand
and consent that future issuance of stock will dilute Sellers' proportionate
ownership of Purchaser.
1.4 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at a time, place and date agreed to mutually by the
Parties.
1.5 CLOSING DELIVERIES.
1.5.1 SELLERS' DOCUMENTS. At the Closing, Sellers will deliver to
Escrow Agent:
(a) original certificates representing the Corporate Shares duly
endorsed (or accompanied by duly executed stock powers);
(b) Restated Global Escrow Agreement, as amended, executed by
Sellers, Buyer and the Escrow Agent;
(c) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and
warranties in this Agreement was accurate in all respects as of the
date of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date.
1.5.2 BUYER'S DOCUMENTS. At the Closing, Buyer will deliver to
Escrow Agent:
(a) cash in the amount of $153,000.00;
(b) a promissory note payable to Sellers in the principal amount
of $306,000.00 (the "Installment Promissory Note");
<PAGE>
(c) two certificates representing 45,750 shares each of Buyer's
$0.001 par value common stock in the name of each respective
shareholder; and
(d) a certificate executed by Buyer to the effect that each of
Buyer's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
To the best of their individual and collective knowledge and belief, Sellers
represent and warrant to Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. (a) the Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Colorado, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and assets
that it purports to own or use, and to perform all its obligations under
applicable contracts. the Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
2.2 AUTHORITY. This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Sellers have the absolute and unrestricted right, power, authority, and capacity
to execute, deliver and perform their obligations under this Agreement.
2.3 NO CONFLICT. Neither the execution and delivery of this Agreement
nor the consummation or performance of any of the contemplated transactions by
Sellers will violate or constitute a default under any mortgage, indenture, deed
of trust, lease, contract, agreement, license or other instrument or any order,
judgement or ruling of any governmental authority to which either Seller is
subject, or to the best knowledge of Sellers, any of the property of the Company
is bound, or result in the creation of any mortgage, pledge, lien, charge or
encumbrance upon any of the assets of the Company or the loss of any license or
other contractual right with respect thereto, except in each case for any of the
foregoing which is not, individually or in the aggregate, material to the
Company.
Except as may be set forth in Exhibit A, no Seller or the Company is or will
be required to give any notice to or obtain any consent from any person in
connection with the execution and delivery of this Agreement or the consummation
or performance of the transaction contemplated hereby.
Sellers are acquiring the Promissory Notes and the shares of Buyer's common
stock for
<PAGE>
their own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act. Each Seller is an "accredited investor"
as such term is defined in Rule 501(a) under the Securities Act of 1933, as
amended, (the "Securities Act") and the rules and regulations promulgated
thereunder.
2.4 CAPITALIZATION. The authorized capital stock of the Company consists
of 10,000 authorized shares of common stock, par value $0.00 per share, of which
2,000 shares are issued and outstanding and constitute the Shares. Sellers are
and will be on the Closing Date the record and beneficial owners and holders of
the Shares, free and clear of all Encumbrances. Martin owns 1,000 of the Shares
and Peterman owns 1,000 of the Shares. No legend or other reference to any
purported Encumbrance appears upon any certificate representing equity
securities of the Company. All of the outstanding equity securities of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any state law regulating the sale and
issuance of securities. the Company does not own, nor does it have any Contract
to acquire, any equity securities or other securities of any other business or
any direct or indirect equity or ownership interest in any other business.
2.5 FINANCIAL STATEMENTS. Sellers have delivered to Buyer unaudited
balance sheets of the Company as of January 31, 2000 (the "Balance Sheet"), and
the related unaudited statements of income, changes in stockholders' equity, and
cash flow for each of the fiscal years then ended. Such financial statements and
notes were prepared in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the balance sheet); the financial statements referred to in this
Section reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements. No financial statements of any person or entity other than
the Company are required by GAAP to be included in the consolidated financial
statements of the Company. See Exhibit J.
2.6 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Company. At the Closing, all of those books and records will be in the
possession of the Company.
2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Sellers have delivered to Buyer a
complete and accurate list of all real and personal property interests owned by
the Company.
<PAGE>
the Company owns all the properties and assets that have been disclosed to
Buyer. All material properties disclosed as being owned by the Company are owned
free and clear of all liens and encumbrances except as previously disclosed in
writing to Buyer.
2.8 CONDITION AND SUFFICIENCY OF ASSETS. To the best of Sellers'
knowledge, except as set forth in Exhibit B, the Company' property and assets
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such property and assets are in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The property and assets of the Company are
sufficient for the continued conduct of the Company' business after the Closing
in substantially the same manner as conducted prior to the Closing.
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected in the accounting records of the Company as of the Closing Date
(collectively, the "Accounts Receivable") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. To the best of Sellers' knowledge, unless paid prior to the Closing
Date, the Accounts Receivable are or will be as of the Closing Date current and
collectible. Absent any unforeseen events, each of the Accounts Receivable
historically has been collected in full within ninety days after the day on
which it first becomes due and payable. Except as may be set forth on Exhibit C
referred to below, there is not any pending, or to Sellers' knowledge
threatened, contest or claim challenging the validity of any of the Accounts
Receivable.
2.10 NO UNDISCLOSED LIABILITIES. Except as may be set forth in Exhibit
D, the Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the ordinary course of business.
2.11 TAXES. To the best of Sellers' knowledge the Company has filed
or caused to be filed within the past five (5) years all tax returns that are
or were required to be filed by or with respect to the Company, pursuant to
applicable laws and regulations (except use tax returns). Sellers have
delivered or made available to Buyer copies of all such tax returns filed
since 1997. To the best of Sellers' knowledge, all tax returns filed by the
Company are true, correct, and complete. Sellers agree to cooperate in the
event Buyer makes an election under Reg. Section 1.338(h)(10)-1T. The Parties
agree to use the book value of the inventory of the corporation per the
financial information provided under Section 2.51 as the fair market value of
the inventory and to use the amount determined by Seller as the fair market
value of the fixed assets of the Corporation on the effective date for all
tax purposes. Sellers will be responsible for taxes on income earned only
through 1/31/00. Kreisman, Wolach & Williams, P.C. will prepare said
corporate return through 1/31/00.
2.12 NO MATERIAL ADVERSE CHANGE. To the best of Sellers' knowledge,
since the date of the Balance Sheet, there has not been any material adverse
change in the business,
<PAGE>
operations, properties, prospects, assets, or condition of the Company, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
2.13 CONTRACTS AND EMPLOYEE BENEFITS. Except as may be set forth in
Exhibit E, the Company is not a party to any contract or agreement that involves
annual payments by the Company in excess of $25,000, other than in the ordinary
course of business. The consummation of the transaction contemplated herein will
not result in the termination of any material agreement or contract to which the
Company is a party, nor give any party thereto the right to cancel or terminate
any such contract or agreement.
2.14 ERISA MATTERS. See Special Provisions, Exhibit F.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as may be set forth on
Exhibit G, the Company has not received any notice of any violation of any laws
or regulations that are or were applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets, which violation
has not been cured as of the Closing Date, and to the best knowledge of Sellers,
the Company is in full compliance with all such laws or regulations.
2.16 GOVERNMENTAL AUTHORIZATIONS. the Company has obtained all
governmental authorizations and permits that are necessary to permit the Company
to lawfully conduct and operate its business in the manner currently conducted.
See Exhibit E.
2.17 LEGAL PROCEEDINGS. Except as disclosed in Exhibit H, there is no
material lawsuit or legal or administrative or regulatory proceeding or
investigation pending against the Company, or, to the best knowledge of Sellers,
threatened against the Company.
2.18 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as may be set forth
in Exhibit I, since the date of the Balance Sheet, the Company has conducted its
business only in the ordinary course of business and there has not been any:
(a) change in the Company' authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital
stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock;
(b) amendment to the organizational documents of the Company;
(c) payment or increase by the Company of any extraordinary bonuses,
salaries, or other compensation to any stockholder, director, officer,
or (except in the ordinary course of business) employee or entry into
any employment,
<PAGE>
severance, or similar contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) material damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business, financial
condition, or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any contract or
transaction involving a total remaining commitment by or to the Company
of at least $25,000;
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company;
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of $25,000; or
(i) material change in the accounting methods used by the Company.
2.19 INSURANCE. the Company maintains policies of insurance in such
amounts, with such deductibles and against such risks and losses as are, in its
judgment, reasonable for the business and assets of the Company, and Sellers
will deliver to Buyer on the Closing Date certificates of insurance setting
forth the name of the insurance company, policy number and type of coverage of
all insurance policies maintained as of the date hereof with respect to the
Company' business operations, property, plant and equipment.
2.20 ENVIRONMENTAL MATTERS. There are no pending or, to the knowledge of
Sellers and the Company, threatened claims, encumbrances, or other restrictions
of any nature, resulting from any environmental, health, and safety liabilities
or arising under or pursuant to any environmental law, with respect to or
affecting any of the operations, properties and assets (whether real, personal,
or mixed) in which Sellers or the Company has or had an interest.
2.21 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Exhibits attached to this Agreement omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading. There is no
fact known to either Seller that has specific
<PAGE>
application to either Seller or the Company (other than general economic or
industry conditions) and that materially adversely affects or, as far as either
Seller can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Company (on a
consolidated basis) that has not been set forth in this Agreement or the
Exhibits attached hereto.
2.22 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nevada.
3.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the legal, valid,
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms. Upon the execution and delivery by Buyer of the Employment
Agreements, and the Promissory Notes (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents. Except as set forth in Exhibit G, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions contemplated hereby will give any person the right to prevent,
delay, or otherwise interfere with any of the transactions contemplated hereby
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any legal requirement or order to which Buyer may be subject;
or
(iv) any contract to which Buyer is a party or by which Buyer may be
bound.
Except as set forth in Exhibit G, Buyer is not and will not be required to
obtain any Consent from any person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the transactions
contemplated hereby.
<PAGE>
3.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act.
3.4 CERTAIN PROCEEDINGS. There is no pending legal proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's knowledge, there exist no grounds for such
proceeding, nor has any such proceeding been threatened.
3.5 BROKERS OR FINDERS. Buyer and its officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
4. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
4.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Sellers will, and will cause the Company and its representatives
to, (a) afford Buyer and its representatives and prospective lenders and their
representatives (collectively, "Buyer's Advisors") full and free access to the
Company' personnel, properties, contracts, books and records, and other
documents and data, (b) furnish Buyer and Buyer's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
4.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the
date of this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the ordinary course
of business;
(b) use their best efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of such the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such
the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
<PAGE>
(d) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of the Company.
4.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any material change in the business of the
Company is likely to occur.
4.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Company to, make all reports
and filings required by applicable laws and regulations to be made by them in
order to consummate the transactions contemplated hereby. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause the Company
to, (a) cooperate with Buyer with respect to all filings that Buyer elects to
make or is required by applicable laws and regulations to make in connection
with the transactions contemplated hereby, and (b) cooperate with Buyer in
obtaining all consents necessary or appropriate to consummate the transactions
contemplated hereby.
4.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or the Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in this Agreement or the Exhibits
attached to this Agreement, Sellers will promptly deliver to Buyer a supplement
to this Agreement or the Exhibits attached hereto specifying such change. During
the same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Section or of the occurrence of any
event that may make the satisfaction of the conditions to closing set forth in
this Agreement impossible or unlikely.
4.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to the
Company by either Seller or any related person of either Seller to be paid in
full prior to Closing.
4.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated, Sellers will not, and will cause the Company and each of their
representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any
<PAGE>
unsolicited inquiries or proposals from, any person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the ordinary course of business) of the Company, or any of the capital stock of
the Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
4.8 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers will use their best efforts to cause the conditions to closing set
forth in this Agreement to be satisfied.
5. COVENANTS OF BUYER PRIOR TO CLOSING DATE
5.1 APPROVALS OF GOVERNMENTAL AUTHORITIES. As promptly as practicable
after the date of this Agreement, Buyer will make all filings and obtain all
consents required by applicable laws and regulations in order to consummate the
transactions contemplated hereby.
5.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its best efforts to cause the conditions in Sections 6 and
7 to be satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
6.2 SELLERS' PERFORMANCE. All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects. Seller must have delivered each of the
documents required to be delivered by Seller pursuant to Section 1.5.1.
6.3 CONSENTS. Each of the consents required to consummate the
transactions contemplated hereby must have been obtained and must be in full
force and effect.
6.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against Buyer, or against any person
affiliated with Buyer, any
<PAGE>
proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the transactions contemplated hereby, or (b) that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the transactions contemplated hereby.
6.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have been made or threatened by any person any claim asserting that such person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in the Company, or (b) is entitled to all or any portion of
the purchase price payable for the Shares.
6.6 NO PROHIBITION. Neither the consummation nor the performance of any
of the transactions contemplated hereby will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any person affiliated with
Buyer to suffer any material adverse consequence under, any applicable laws or
regulations.
7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that Buyer
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects. Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 1.5.2 and must have made
the cash payments required to be made by Buyer pursuant to Section 1.5.2.
7.3 CONSENTS. All of the consents required to be obtained from Buyer
must have been obtained and must be in full force and effect.
7.4 NO PROHIBITION. Neither the consummation nor the performance of any
of the transactions contemplated hereby will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or
<PAGE>
cause Seller or any person affiliated with Seller to suffer any material adverse
consequence under, any applicable laws or regulations.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer or Sellers if a material breach of any provision
of this Agreement has been committed by the other party and such breach
has not been waived;
(b) (i) by Buyer if any of the conditions in Section 6 has not been
satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Sellers,
if any of the conditions in Section 7 has not been satisfied as of the
Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Sellers to comply with
their obligations under this Agreement) and Sellers have not waived such
condition on or before the Closing Date; or
(c) by mutual consent of Buyer and Sellers.
8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 10.1 and 10.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY Knowledge. All
representations, warranties, covenants, and obligations in this Agreement and
the Exhibits attached hereto, will survive the Closing. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this
<PAGE>
Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of damages, or other remedy based
on such representations, warranties, covenants, and obligations.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers, jointly
and severally, will indemnify and hold harmless Buyer, the Company, and their
respective representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any and all loss, liability or damage suffered or incurred by
Buyer in respect of any debt, obligation or liability of the Company or
of Seller not disclosed in this Agreement, any of the Exhibits attached
hereto, or in writing to Buyer prior to the Closing Date;
(b) any breach of any representation or warranty made by Sellers in
this Agreement, the Exhibits attached hereto, or any other certificate
or document delivered by Sellers pursuant to this Agreement;
(c) any breach of any representation or warranty made by Sellers in
this Agreement as if such representation or warranty were made on and as
of the Closing Date;
(d) any Breach by either Seller of any covenant or obligation of
such Seller in this Agreement;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either
Seller or the Company (or any person acting on their behalf) in
connection with any of the transactions contemplated hereby.
The remedies provided in this Section 9.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
damages arising, directly or indirectly, from or in connection with (a) any
breach of any representation
<PAGE>
or warranty made by Buyer in this Agreement or in any certificate delivered by
Buyer pursuant to this Agreement, (b) any breach by Buyer of any covenant or
obligation of Buyer in this Agreement, or (c) any claim by any person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such person with Buyer
(or any person acting on its behalf) in connection with any of the transactions
contemplated hereby.
10. GENERAL PROVISIONS
10.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
10.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as the parties mutually agree.
Sellers and Buyer will consult with each other concerning the means by which the
Company' employees, customers, and suppliers and others having dealings with the
Company will be informed of the transactions contemplated hereby.
10.3 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the transactions contemplated hereby, unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, or (c) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. If the transactions contemplated hereby are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
10.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight
<PAGE>
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Sellers:
Mitchell J. Martin
P.O. Box 16423
Denver, Colorado 80216-0423
Phone: (303)
Fax: (303)
Lloyd E. Peterman
P.O. Box 16423
Denver, Colorado 80216-0423
Phone: (303)
Fax: (303)
with a copy to:
Fenton A. Bain, P.C.
3100 Arapahoe Avenue, Suite 400
Boulder, CO 80303
Phone: (303) 443-5083
Fax: (303) 443-5479
Buyer:
Venturi Technologies, Inc.
763 North 530 East
Orem, Utah 84097
Attn: Gaylord M. Karren, Chairman and CEO
Phone: (801) 235-9552
Fax: (801) 235-1731
(With a copy to Randy K. Johnson, Esq., Chief Counsel)
10.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Utah, County of Salt Lake, or, if it has or can acquire jurisdiction, in the
United States District Court for the Central District of Utah, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
10.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to
<PAGE>
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
10.7 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
10.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated August 4, 1999)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
10.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held
<PAGE>
invalid or unenforceable.
10.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
10.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
10.13 GOVERNING LAW. This Agreement will be governed by the laws of the
State of Utah without regard to conflicts of laws principles.
10.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
10.15 ESCROW DISBURSEMENTS AND REPORTS The Parties agree that with each
disbursement or release from Escrow that upon instructions all payments on the
Note may be made directly to the constituent parties comprising the Seller
Entities. VTI further agrees to forward a photocopy of all checks or wire
transfer debits made to the Escrow Agent.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
VENTURI TECHNOLOGIES, INC.
By:
--------------------------------------
Its:
---------------------------------
<PAGE>
SELLERS:
-----------------------------------------
Mitchell J. Martin
-----------------------------------------
Lloyd E. Peterman
<PAGE>
EXHIBIT A
(Notice)
<PAGE>
EXHIBIT B
(Property and assets in need of maintenance or repairs)
<PAGE>
EXHIBIT C
(Pending or threatened, contest or claim challenging the validity of any of the
Accounts Receivable)
<PAGE>
EXHIBIT D
(Liabilities and Obligations)
<PAGE>
EXHIBIT E
(Contracts or Agreement that involve annual payments by the Company in excess of
$25,000)
<PAGE>
EXHIBIT F
<PAGE>
EXHIBIT F
(ERISA matters)
NONE
<PAGE>
EXHIBIT G
(Violation of any laws or regulations)
Not Applicable.
<PAGE>
EXHIBIT H
(Pending lawsuits or proceedings)
Not Applicable.
<PAGE>
EXHIBIT I
(Changes in stock, amendments to organizational documents, changes in financial
condition of All-Fours Distributing, Inc.)
<PAGE>
STOCK PURCHASE AGREEMENT
(MPI of Colorado, Inc.)
This STOCK PURCHASE AGREEMENT is made as of February 1, 2000, by VENTURI
TECHNOLOGIES, INC., a Nevada corporation ("Buyer"), and MITCHELL J. MARTIN
("Martin") and LLOYD E. PETERMAN ("Peterman") (Martin and Peterman are
collectively referred to as "Sellers").
RECITALS
A. Sellers equally own all of the issued and outstanding capital stock (the
"Corporate Shares" or "Shares") of MPI of Colorado, Inc., a Colorado
corporation, formerly known as Martin & Peterman, Inc. (hereinafter referred to
as either "MPI/Colorado" or the "Company").
B. Sellers desire to sell, and Buyer desires to purchase, all of the
Corporate Shares (hereinafter "Shares") for the consideration and on the terms
set forth in this Agreement.
C. Sellers also desire to sell, and Buyer desires to purchase, the sales
and installation operation as a part of the Company, subject to the right of
Sellers to repurchase 49% of such sales and installation portion of the
business.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
of this Agreement, at the Closing, Sellers will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Sellers.
1.2 SALES AND INSTALLATION BUSINESS. A portion of the business
conducted by the Company consists of the sale and installation of carpet.
Although the Buyer is acquiring all of the sales and installation portion of the
Company's business, the parties intend that the Sellers be allowed to repurchase
a total of 49% of the sale and installation portion of the Company's business if
that portion of the business achieves "gross revenues" of $2,500,00.00 in any
calendar year within four (4) years from the date of Closing. For the purposes
hereof, "gross revenues" shall refer to any receipt, income, revenues or cash
fees without deduction or offset.
To carry out this expressed interest, the parties have agreed that the
sales and installation portion of the Company's business shall be spun off or
otherwise transferred to a separate entity ("Newco"). Buyer shall own 100% of
the total outstanding ownership interest in Newco, subject
<PAGE>
to the right of Seller to acquire for $10.00 an interest in Newco equal to a
total of 49% of the then outstanding ownership interest of Newco as heretofore
delineated. Upon creation of Newco, which Buyer agrees shall be accomplished
within ninety (90) days from the date of closing, Buyer shall deliver to Sellers
a warrant agreement containing the terms set forth above, and the Global Escrow
Instructions will be amended for the escrow of 49% of the Newco shares as herein
provided.
1.3 PURCHASE PRICE.
1.3.1 CASH AND PROMISSORY NOTE. At the Closing, Buyer will pay or
deliver to Sellers the following as partial consideration for the Shares of MPI
of Colorado, Inc.:
(a) One Hundred Fifty-Seven Thousand dollars ($157,000.00) cash at
closing;
(b) A promissory note duly executed by Buyer in the principal amount
of One Million Eight Hundred Eighty Thousand and no/100 Dollars
($1,880,000.00), in the form and pursuant to the terms of Exhibit
K, attached hereto ("Installment Promissory Note").
(c) A companion sixty (60) day promissory note of even date ("Balloon
Note") executed by Buyer in the principal amount of $1,348,836.63,
comprised of $386,933.34 allocated to reimburse Sellers for funds drawn
from the down payment and applied toward operating expenses and debt
service by Buyer. Of the balance $883,000.00 has been allocated toward the
cost of MPI Shares. The form of the Balloon Note is attached as Exhibit O.
1.3.2 VENTURI STOCK. As additional consideration for the Shares, Buyer
shall issue to Sellers Four Hundred Eighty-Two Thousand Five Hundred (482,500)
shares of Buyer's authorized but unissued $0.001 par value common stock. Said
shares shall be evidenced by two (2) separate certificates in an equal amount
issued to each of the Sellers individually.
1.3.3 ESCROW AND CERTIFICATES. The Venturi Shares shall be subject to
forfeiture if Sellers breach certain of the representations or warranties in
this Agreement, or if certain of the representations made by Sellers in this
Agreement turn out to be untrue, as shall be more fully set forth in the
Restated Global Escrow Agreement, as amended. The Venturi Shares shall be held
by Escrow Agent pursuant to the terms of the Restated Global Escrow Agreement,
as amended. The certificates representing the Venturi Shares shall contain, for
so long as the Venturi Shares are held in escrow, a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
<PAGE>
FORFEITURE AND ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING
AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE THAT THE SHARES MAY NOT BE OFFERED OR SOLD
FOR A CERTAIN PERIOD OF TIME AFTER THE DATE OF ISSUANCE.
1.3.4 RESTRICTED STOCK. The Venturi Shares have not been registered
with the Securities and Exchange Commission, nor have the Venturi Shares been
qualified under the securities laws of any state. The Sellers acknowledge that
the Venturi Shares are subject to the following restriction which will be
printed in the following form on the certificates representing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY INTEREST THEREIN
MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION UNDER THE LAW OR
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE OR OFFER.
Sellers represent the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Sellers are acquiring
the Shares for their own account, for investment, and not for resale in
connection with any distribution thereof. Sellers have such knowledge and
experience in business and financial matters that they are capable of evaluating
the risks of obtaining the Shares. Sellers understand the speculative nature of
the Shares. Sellers have adequate net worth and means to provide for their
current needs and to sustain a complete loss of their investment. Sellers have
no need of liquidity of their investment. Sellers understand that at present
only a limited public market exists, and that a more general public market may
never exist, for the Shares and that the Purchaser is under no obligation to
provide a market for the Shares.
1.4 CONSENT TO DILUTION. Sellers understand that Purchaser plans to acquire
other businesses and assets by issuing stock, and that Purchaser may issue
shares of its stock for other reasons in the future. Sellers understand and
consent that future issuance of stock will dilute Sellers' proportionate
ownership of Purchaser.
1.5 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at a time, place and date agreed to mutually by the
Parties.
<PAGE>
1.6 CLOSING DELIVERIES.
1.6.1 SELLERS' DOCUMENTS. At the Closing, Sellers will deliver to
Escrow Agent:
(a) original certificates representing the Corporate Shares duly
endorsed (or accompanied by duly executed stock powers);
(b) Restated Global Escrow Agreement, as amended, executed by
Sellers, Buyer and the Escrow Agent;
(c) a certificate executed by Sellers representing and warranting
to Buyer that each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date as if
made on the Closing Date.
1.6.2 BUYER'S DOCUMENTS. At the Closing, Buyer will deliver to Escrow
Agent:
(a) cash in the amount of $157,000.00;
(b) a promissory note payable to Sellers in the principal amount
of $1,880,000.00 (the "Installment Promissory Note");
(c) a promissory note payable to Sellers in the principal amount
of $1,348,836.63 (the "Balloon Note");
(d) two certificates representing 241,250 shares each of Buyer's
$0.001 par value common stock in the name of each respective
shareholder; and
(e) a certificate executed by Buyer to the effect that each of
Buyer's representations and warranties in this Agreement was accurate
in all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
To the best of their individual and collective knowledge and belief,
Sellers represent and warrant to Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. (a) the Company is a corporation
duly
<PAGE>
organized, validly existing, and in good standing under the laws of the State of
Colorado, with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it purports
to own or use, and to perform all its obligations under applicable contracts.
the Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
2.2 AUTHORITY. This Agreement constitutes the legal, valid, and
binding obligation of Sellers, enforceable against Sellers in accordance with
its terms. Sellers have the absolute and unrestricted right, power, authority,
and capacity to execute, deliver and perform their obligations under this
Agreement.
2.3 NO CONFLICT. Neither the execution and delivery of this Agreement
nor the consummation or performance of any of the contemplated transactions by
Sellers will violate or constitute a default under any mortgage, indenture, deed
of trust, lease, contract, agreement, license or other instrument or any order,
judgement or ruling of any governmental authority to which either Seller is
subject, or to the best knowledge of Sellers, any of the property of the Company
is bound, or result in the creation of any mortgage, pledge, lien, charge or
encumbrance upon any of the assets of the Company or the loss of any license or
other contractual right with respect thereto, except in each case for any of the
foregoing which is not, individually or in the aggregate, material to the
Company.
Except as may be set forth in Exhibit A, no Seller or the Company is or
will be required to give any notice to or obtain any consent from any person in
connection with the execution and delivery of this Agreement or the consummation
or performance of the transaction contemplated hereby.
Sellers are acquiring the Promissory Notes and the shares of Buyer's common
stock for their own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act. Each Seller is an "accredited
investor" as such term is defined in Rule 501(a) under the Securities Act of
1933, as amended, (the "Securities Act") and the rules and regulations
promulgated thereunder.
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000 authorized shares of common stock, par value $0.00 per share,
of which 2,000 shares are issued and outstanding and constitute the Shares.
Sellers are and will be on the Closing Date the record and beneficial owners and
holders of the Shares, free and clear of all Encumbrances. Martin owns 1,000 of
the Shares and Peterman owns 1,000 of the Shares. No legend or other reference
to any purported Encumbrance appears upon any certificate representing equity
securities of the Company. All of the outstanding equity securities of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or
<PAGE>
other securities of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the Securities Act or
any state law regulating the sale and issuance of securities. the Company does
not own, nor does it have any Contract to acquire, any equity securities or
other securities of any other business or any direct or indirect equity or
ownership interest in any other business.
2.5 FINANCIAL STATEMENTS. Sellers have delivered to Buyer unaudited
balance sheet of MPI of Colorado, Inc. as of January 31, 2000 (the "Balance
Sheet"), and the related unaudited statements of income, changes in
stockholders' equity, and cash flow for each of the period then ended. Such
financial statements and notes were prepared in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the balance sheet); the financial
statements referred to in this Section reflect the consistent application of
such accounting principles throughout the periods involved, except as disclosed
in the notes to such financial statements. No financial statements of any person
or entity other than the Company are required by GAAP to be included in the
consolidated financial statements of the Company. See Exhibit J.
2.6 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of the Company. At the Closing, all of those books and
records will be in the possession of the Company.
2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Sellers have delivered to Buyer
a complete and accurate list of all real and personal property interests owned
by the Company. the Company owns all the properties and assets that have been
disclosed to Buyer. All material properties disclosed as being owned by the
Company are owned free and clear of all liens and encumbrances except as
previously disclosed in writing to Buyer.
2.8 CONDITION AND SUFFICIENCY OF ASSETS. To the best of Sellers'
knowledge, except as set forth in Exhibit B, the Company' property and assets
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such property and assets are in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The property and assets of the Company are
sufficient for the continued conduct of the Company' business after the Closing
in substantially the same manner as conducted prior to the Closing.
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected in the accounting records of the Company as of the Closing Date
(collectively, the "
<PAGE>
Accounts Receivable") represent valid obligations arising from sales actually
made or services actually performed in the ordinary course of business. To the
best of Sellers' knowledge, unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible. Absent
any unforeseen events, each of the Accounts Receivable historically has been
collected in full within ninety days after the day on which it first becomes due
and payable. Except as may be set forth on Exhibit C referred to below, there is
not any pending, or to Sellers' knowledge threatened, contest or claim
challenging the validity of any of the Accounts Receivable.
2.10 NO UNDISCLOSED LIABILITIES. Except as may be set forth in Exhibit
D, the Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the ordinary course of business.
2.11 TAXES. To the best of Sellers' knowledge the Company has filed
or caused to be filed within the past five (5) years all tax returns that are
or were required to be filed by or with respect to the Company, pursuant to
applicable laws and regulations (except use tax returns). Sellers have
delivered or made available to Buyer copies of all such tax returns filed
since 1997. To the best of Sellers' knowledge, all tax returns filed by the
Company are true, correct, and complete. The Parties agree to use the book
value of the inventory of the corporation per the financial information
provided under Section 2.5 as the fair market value of the inventory and to
use the amount determined by Seller as the fair market value of the fixed
assets of the Corporation on the effective date for all tax purposes.
Kreisman, Wolach & Williams, P.C. will prepare said corporate return for the
fiscal year ending 1/31/00.
2.12 NO MATERIAL ADVERSE CHANGE. To the best of Sellers' knowledge,
since the date of the Balance Sheet, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of the Company, and no event has occurred or circumstance exists that may result
in such a material adverse change.
2.13 CONTRACTS AND EMPLOYEE BENEFITS. Except as may be set forth in
Exhibit E, the Company is not a party to any contract or agreement that involves
annual payments by the Company in excess of $25,000, other than in the ordinary
course of business. The consummation of the transaction contemplated herein will
not result in the termination of any material agreement or contract to which the
Company is a party, nor give any party thereto the right to cancel or terminate
any such contract or agreement. A list of Employees and benefits are contained
in Exhibit N.
2.14 ERISA MATTERS. See Special Provisions, Exhibit F.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as may be set forth on
Exhibit G, the Company has not received any notice of any violation of any laws
or
<PAGE>
regulations that are or were applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets, which violation has
not been cured as of the Closing Date, and to the best knowledge of Sellers, the
Company is in full compliance with all such laws or regulations.
2.16 GOVERNMENTAL AUTHORIZATIONS. The Company has obtained all
governmental authorizations and permits that are necessary to permit the Company
to lawfully conduct and operate its business in the manner currently conducted.
2.17 LEGAL PROCEEDINGS. Except as disclosed in Exhibit H, there is no
material lawsuit or legal or administrative or regulatory proceeding or
investigation pending against the Company, or, to the best knowledge of Sellers,
threatened against the Company.
2.18 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as may be set forth
in Exhibit I, since the date of the Balance Sheet, the Company has conducted its
business only in the ordinary course of business and there has not been any:
(a) change in the Company' authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock;
or declaration or payment of any dividend or other distribution or payment
in respect of shares of capital stock;
(b) amendment to the organizational documents of the Company;
(c) payment or increase by the Company of any extraordinary bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the ordinary course of business) employee or entry into any
employment, severance, or similar contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) material damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition,
or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any contract or transaction
involving a total remaining commitment by or to the Company of at least
$25,000;
<PAGE>
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance
on any material asset or property of the Company;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $25,000; or
(i) material change in the accounting methods used by the Company.
2.19 INSURANCE. the Company maintains policies of insurance in such
amounts, with such deductibles and against such risks and losses as are, in its
judgment, reasonable for the business and assets of the Company, and Sellers
will deliver to Buyer on the Closing Date certificates of insurance setting
forth the name of the insurance company, policy number and type of coverage of
all insurance policies maintained as of the date hereof with respect to the
Company' business operations, property, plant and equipment. See Exhibit M.
2.20 ENVIRONMENTAL MATTERS. There are no pending or, to the knowledge
of Sellers and the Company, threatened claims, encumbrances, or other
restrictions of any nature, resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any environmental law, with respect
to or affecting any of the operations, properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
2.21 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Exhibits attached to this Agreement omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading. There is no
fact known to either Seller that has specific application to either Seller or
the Company (other than general economic or industry conditions) and that
materially adversely affects or, as far as either Seller can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Company (on a consolidated basis) that has not been
set forth in this Agreement or the Exhibits attached hereto.
2.22 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
<PAGE>
organized, validly existing, and in good standing under the laws of the State of
Nevada.
3.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms. Upon the execution and delivery by Buyer of the Employment
Agreements, and the Promissory Notes (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents. Except as set forth in Exhibit G, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions contemplated hereby will give any person the right to prevent,
delay, or otherwise interfere with any of the transactions contemplated hereby
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any legal requirement or order to which Buyer may be
subject; or
(iv) any contract to which Buyer is a party or by which Buyer may
be bound.
Except as set forth in Exhibit G, Buyer is not and will not be required to
obtain any Consent from any person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the transactions
contemplated hereby.
3.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
3.4 CERTAIN PROCEEDINGS. There is no pending legal proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's knowledge, there exist no grounds for such
proceeding, nor has any such proceeding been threatened.
3.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a
<PAGE>
result of the action of Buyer or its officers or agents.
4. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
4.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Company and its
representatives to, (a) afford Buyer and its representatives and prospective
lenders and their representatives (collectively, "Buyer's Advisors") full and
free access to the Company' personnel, properties, contracts, books and records,
and other documents and data, (b) furnish Buyer and Buyer's Advisors with copies
of all such contracts, books and records, and other existing documents and data
as Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
4.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the
date of this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the ordinary
course of business;
(b) use their best efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of such the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with such the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the status
of the business, operations, and finances of the Company.
4.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any material change in the business of the
Company is likely to occur.
4.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Company to, make all reports
and filings required by applicable laws and regulations to be made by them in
order to consummate the transactions contemplated hereby. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause the Company
to, (a) cooperate with Buyer with respect to all
<PAGE>
filings that Buyer elects to make or is required by applicable laws and
regulations to make in connection with the transactions contemplated hereby, and
(b) cooperate with Buyer in obtaining all consents necessary or appropriate to
consummate the transactions contemplated hereby.
4.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or the Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in this Agreement or the Exhibits
attached to this Agreement, Sellers will promptly deliver to Buyer a supplement
to this Agreement or the Exhibits attached hereto specifying such change. During
the same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Section or of the occurrence of any
event that may make the satisfaction of the conditions to closing set forth in
this Agreement impossible or unlikely.
4.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to the
Company by either Seller or any related person of either Seller to be paid in
full prior to Closing.
4.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated, Sellers will not, and will cause the Company and each of their
representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the ordinary course
of business) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company.
4.8 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers will use their best efforts to cause the conditions to closing set
forth in this Agreement to be satisfied.
5. COVENANTS OF BUYER PRIOR TO CLOSING DATE
5.1 APPROVALS OF GOVERNMENTAL AUTHORITIES. As promptly as practicable
after the date of this Agreement, Buyer will make all filings and obtain all
consents required by applicable laws and regulations in order to consummate the
transactions contemplated hereby.
<PAGE>
5.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its best efforts to cause the conditions in Sections 6 and
7 to be satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
6.2 SELLERS' PERFORMANCE. All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects. Seller must have delivered each of the
documents required to be delivered by Seller pursuant to Section 1.5.1.
6.3 CONSENTS. Each of the consents required to consummate the
transactions contemplated hereby must have been obtained and must be in full
force and effect.
6.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against Buyer, or against any person
affiliated with Buyer, any proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
hereby, or (b) that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the transactions contemplated hereby.
6.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or threatened by any person any claim asserting that such
person (a) is the holder or the beneficial owner of, or has the right to acquire
or to obtain beneficial ownership of, any stock of, or any other voting, equity,
or ownership interest in the Company, or (b) is entitled to all or any portion
of the purchase price payable for the Shares.
6.6 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any person affiliated with
Buyer to suffer any material adverse consequence
<PAGE>
under, any applicable laws or regulations.
7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects. Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 1.5.2 and must have made
the cash payments required to be made by Buyer pursuant to Section 1.5.2.
7.3 CONSENTS. All of the consents required to be obtained from Buyer
must have been obtained and must be in full force and effect.
7.4 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Seller or any person affiliated with
Seller to suffer any material adverse consequence under, any applicable laws or
regulations.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material breach of any
provision of this Agreement has been committed by the other party and
such breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 6 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under
<PAGE>
this Agreement) and Buyer has not waived such condition on or before
the Closing Date; or (ii) by Sellers, if any of the conditions in
Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers to comply with their obligations under
this Agreement) and Sellers have not waived such condition on or
before the Closing Date; or
(c) by mutual consent of Buyer and Sellers.
8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 10.1 and 10.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY Knowledge. All
representations, warranties, covenants, and obligations in this Agreement and
the Exhibits attached hereto, will survive the Closing. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company, and
their respective representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
<PAGE>
(a) any and all loss, liability or damage suffered or incurred by
Buyer in respect of any debt, obligation or liability of the Company or of
Seller not disclosed in this Agreement, any of the Exhibits attached
hereto, or in writing to Buyer prior to the Closing Date;
(b) any breach of any representation or warranty made by Sellers in
this Agreement, the Exhibits attached hereto, or any other certificate or
document delivered by Sellers pursuant to this Agreement;
(c) any breach of any representation or warranty made by Sellers in
this Agreement as if such representation or warranty were made on and as of
the Closing Date;
(d) any Breach by either Seller of any covenant or obligation of such
Seller in this Agreement;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or the
Company (or any person acting on their behalf) in connection with any of
the transactions contemplated hereby.
The remedies provided in this Section 9.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
damages arising, directly or indirectly, from or in connection with (a) any
breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
person with Buyer (or any person acting on its behalf) in connection with any of
the transactions contemplated hereby.
10. GENERAL PROVISIONS
10.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel, and accountants. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by
<PAGE>
another party.
10.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as the parties mutually
agree. Sellers and Buyer will consult with each other concerning the means by
which the Company' employees, customers, and suppliers and others having
dealings with the Company will be informed of the transactions contemplated
hereby.
10.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the transactions contemplated hereby, unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, or (c) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. If the transactions contemplated hereby are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
10.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
Mitchell J. Martin
P.O. Box 16423
Denver, Colorado 80216-0423
Phone: (303)
Fax: (303)
Lloyd E. Peterman
P.O. Box 16423
Denver, Colorado 80216-0423
Phone: (303)
<PAGE>
Fax: (303)
with a copy to:
Fenton A. Bain, P.C.
3100 Arapahoe Avenue, Suite 400
Boulder, CO 80303
Phone: (303) 443-5083
Fax: (303) 443-5479
Buyer:
Venturi Technologies, Inc.
763 North 530 East
Orem, Utah 84097
Attn: Gaylord M. Karren, Chairman and CEO
Phone: (801) 235-9552
Fax: (801) 235-1731
(With a copy to Randy K. Johnson, Esq., Chief Counsel)
10.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Utah, County of Salt Lake, or, if it has or can acquire jurisdiction, in the
United States District Court for the Central District of Utah, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
10.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
10.7 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the
<PAGE>
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
10.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated August 4, 1999)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
10.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
10.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
10.13 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Utah without regard to conflicts of laws principles.
<PAGE>
10.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
10.15 ESCROW DISBURSEMENTS AND REPORTS The Parties agree that with
each disbursement or release from Escrow that upon instructions all payments on
the Note may be made directly to the constituent parties comprising the Seller
Entities. VTI further agrees to forward a photocopy of all checks or wire
transfer debits made to the Escrow Agent.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
VENTURI TECHNOLOGIES, INC.
By:
----------------------------------------
Its:
-----------------------------------
SELLERS:
--------------------------------------------
Mitchell J. Martin
--------------------------------------------
Lloyd E. Peterman
<PAGE>
EXHIBIT A
(Notice)
<PAGE>
EXHIBIT B
(Property and assets in need of maintenance or repairs)
All Assets show normal usage and wear.
<PAGE>
EXHIBIT C
(Pending or threatened, contest or claim challenging the validity of any of the
Accounts Receivable)
All uncollectable receivables were written off as bad debts at year-end. If
received, will be considered income.
<PAGE>
EXHIBIT D
(Liabilities and Obligations)
<PAGE>
EXHIBIT E
(Contracts or Agreement that involve annual payments by the Company in excess of
$25,000)
<PAGE>
EXHIBIT F
<PAGE>
EXHIBIT F
(ERISA matters)
NONE
<PAGE>
EXHIBIT G
(Violation of any laws or regulations)
<PAGE>
EXHIBIT H
(Pending lawsuits or proceedings)
<PAGE>
EXHIBIT I
(Changes in stock, amendments to organizational documents, changes in financial
condition of the Company)
<PAGE>
STOCK PURCHASE AGREEMENT
(MPI of Florida, Inc.)
This STOCK PURCHASE AGREEMENT is made as of February 1, 2000, by VENTURI
TECHNOLOGIES, INC., a Nevada corporation ("Buyer"), and MITCHELL J. MARTIN
("Martin") and LLOYD E. PETERMAN ("Peterman") (Martin and Peterman are
collectively referred to as "Sellers").
RECITALS
A. Sellers equally own all of the issued and outstanding capital stock (the
"Corporate Shares" or "Shares") of MPI OF FLORIDA, INC., a Florida corporation
(hereinafter referred to as either "MPI/Florida" or the "Company").
B. Sellers desire to sell, and Buyer desires to purchase, all of the
Corporate Shares (hereinafter "Shares") for the consideration and on the terms
set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
of this Agreement, at the Closing, Sellers will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Sellers.
1.2 PURCHASE PRICE.
1.2.1 CASH AND PROMISSORY NOTE. At the Closing, Buyer will pay or
deliver to Sellers the following as consideration for the Shares of MPI of
Florida, Inc. to $1,500,000 following:
(a) Three Hundred Thousand dollars ($300,000.00) cash at
closing;
(b) A promissory note duly executed by Buyer in the principal
amount of Six Hundred Thousand Dollars ($600,000.00), in the
form and pursuant to the terms of Exhibit K, attached hereto
("Installment Promissory Note").
1.2.2 VENTURI STOCK. As additional consideration for the Shares,
Buyer shall issue to Sellers a total of One Hundred Fifty Thousand (150,000)
shares of Buyer's authorized but unissued $0.001 par value common stock. Said
shares shall be evidenced by
<PAGE>
two (2) separate certificates, each in the amount of Seventy-Five Thousand
(75,000) shares to each of the Sellers individually.
1.2.3 ESCROW AND CERTIFICATES. The Venturi Shares shall be
subject to forfeiture if Sellers breach certain of the representations or
warranties in this Agreement, or if certain of the representations made by
Sellers in this Agreement turn out to be untrue, as shall be more fully set
forth in the Restated Global Escrow Agreement, as amended. The Venturi Shares
shall be held by Escrow Agent pursuant to the terms of the Restated Global
Escrow Agreement, as amended. The certificates representing the Venturi Shares
shall contain, for so long as the Venturi Shares are held in escrow, a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE AND
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT
BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE THAT THE SHARES MAY NOT BE OFFERED OR SOLD FOR A CERTAIN
PERIOD OF TIME AFTER THE DATE OF ISSUANCE.
1.2.4 RESTRICTED STOCK. The Venturi Shares have not been
registered with the Securities and Exchange Commission, nor have the Venturi
Shares been qualified under the securities laws of any state. The Sellers
acknowledge that the Venturi Shares are subject to the following restriction
which will be printed in the following form on the certificates representing the
Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY INTEREST THEREIN
MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION UNDER THE LAW OR
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE OR OFFER.
Sellers represent the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Sellers are acquiring
the Shares for their own account, for investment, and not for resale in
connection with any distribution thereof. Sellers have such knowledge and
experience in business and financial matters that they are capable of evaluating
the risks of obtaining the Shares. Sellers understand the speculative nature of
the Shares. Sellers have adequate net worth and means to provide for their
current needs and to
<PAGE>
sustain a complete loss of their investment. Sellers have no need of liquidity
of their investment. Sellers understand that at present only a limited public
market exists, and that a more general public market may never exist, for the
Shares and that the Purchaser is under no obligation to provide a market for the
Shares.
1.3 CONSENT TO DILUTION. Sellers understand that Purchaser plans to
acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Sellers understand
and consent that future issuance of stock will dilute Sellers' proportionate
ownership of Purchaser.
1.4 CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place at a time, place and date agreed to mutually by
the Parties.
1.5 CLOSING DELIVERIES.
1.5.1 SELLERS' DOCUMENTS. At the Closing, Sellers will deliver to
Escrow Agent:
(a) original certificates representing the Corporate Shares
duly endorsed (or accompanied by duly executed stock powers);
(b) Restated Global Escrow Agreement, as amended, executed
by Sellers, Buyer and the Escrow Agent;
(c) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and
warranties in this Agreement was accurate in all respects as of
the date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date.
1.5.2 BUYER'S DOCUMENTS. At the Closing, Buyer will deliver to
Escrow Agent:
(a) cash in the amount of $300,000.00;
(b) the Installment Promissory Note in the principal amount
of $600,000.00 (See Exhibit K);
(c) two certificates representing 75,000 shares each of
Buyer's $0.001 par value common stock in the name of each
respective shareholder; and
(d) a certificate executed by Buyer to the effect that each
of Buyer's representations and warranties in this Agreement was
accurate in all
<PAGE>
respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
To the best of their individual and collective knowledge and belief,
Sellers represent and warrant to Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. (a) The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and assets
that it purports to own or use, and to perform all its obligations under
applicable contracts. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
2.2 AUTHORITY. This Agreement constitutes the legal, valid, and
binding obligation of Sellers, enforceable against Sellers in accordance with
its terms. Sellers have the absolute and unrestricted right, power, authority,
and capacity to execute, deliver and perform their obligations under this
Agreement.
2.3 NO CONFLICT. Neither the execution and delivery of this Agreement
nor the consummation or performance of any of the contemplated transactions by
Sellers will violate or constitute a default under any mortgage, indenture, deed
of trust, lease, contract, agreement, license or other instrument or any order,
judgement or ruling of any governmental authority to which either Seller is
subject, or to the best knowledge of Sellers, any of the property of the Company
is bound, or result in the creation of any mortgage, pledge, lien, charge or
encumbrance upon any of the assets of the Company or the loss of any license or
other contractual right with respect thereto, except in each case for any of the
foregoing which is not, individually or in the aggregate, material to the
Company.
Except as may be set forth in Exhibit A, no Seller or the Company is or
will be required to give any notice to or obtain any consent from any person in
connection with the execution and delivery of this Agreement or the consummation
or performance of the transaction contemplated hereby.
Sellers are acquiring the Promissory Notes and the shares of Buyer's common
stock for their own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act. Each Seller is an "accredited
investor" as such term is defined in Rule 501(a) under the Securities Act of
1933, as amended, (the "Securities Act") and the rules and regulations
promulgated thereunder.
<PAGE>
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000 authorized shares of common stock, par value $0.00 per share,
of which 2,000 shares are issued and outstanding and constitute the Shares.
Sellers are and will be on the Closing Date the record and beneficial owners and
holders of the Shares, free and clear of all Encumbrances. Martin owns 1,000 of
the Shares and Peterman owns 1,000 of the Shares. No legend or other reference
to any purported Encumbrance appears upon any certificate representing equity
securities of the Company . All of the outstanding equity securities of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any state law regulating the sale and
issuance of securities. the Company does not own, nor does it have any Contract
to acquire, any equity securities or other securities of any other business or
any direct or indirect equity or ownership interest in any other business.
2.5 FINANCIAL STATEMENTS. Sellers have delivered to Buyer unaudited
balance sheet of the Company from the period ending 1/31/2000 (the "Balance
Sheet"), and the related unaudited statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal year then ended. Such
financial statements and notes were prepared in accordance with GAAP, subject,
in the case of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the balance sheet); the financial
statements referred to in this Section reflect the consistent application of
such accounting principles throughout the periods involved, except as disclosed
in the notes to such financial statements. No financial statements of any person
or entity other than the Company are required by GAAP to be included in the
consolidated financial statements of the Company.
2.6 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of the Company . At the Closing, all of those books and
records will be in the possession of the Company.
2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Sellers have delivered to Buyer
a complete and accurate list of all real and personal property interests owned
by the Company . the Company owns all the properties and assets that have been
disclosed to Buyer. All material properties disclosed as being owned by the
Company are owned free and clear of all liens and encumbrances except as
previously disclosed in writing to Buyer.
2.8 CONDITION AND SUFFICIENCY OF ASSETS. To the best of Sellers'
knowledge,
<PAGE>
except as set forth in Exhibit B, the Company' property and assets are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such property and assets are in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The property and assets of the Company are
sufficient for the continued conduct of the Company business after the Closing
in substantially the same manner as conducted prior to the Closing.
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected in the accounting records of the Company as of the Closing Date
(collectively, the "Accounts Receivable") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. To the best of Sellers' knowledge, unless paid prior to the Closing
Date, the Accounts Receivable are or will be as of the Closing Date current and
collectible. Absent any unforeseen events, each of the Accounts Receivable
historically has been collected in full within ninety days after the day on
which it first becomes due and payable. Except as may be set forth on Exhibit C
referred to below, there is not any pending, or to Sellers' knowledge
threatened, contest or claim challenging the validity of any of the Accounts
Receivable.
2.10 NO UNDISCLOSED LIABILITIES. Except as may be set forth in Exhibit
D, the Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the ordinary course of business.
2.11 TAXES. To the best of Sellers' knowledge, the Company has
filed or caused to be filed within the past five (5) years all tax returns
that are or were required to be filed by or with respect to the Company,
pursuant to applicable laws and regulations (except use tax returns). Sellers
have delivered or made available to Buyer copies of all such tax returns
filed since 1997. To the best of Seller's knowledge, all tax returns filed by
the Company are true, correct, and complete. The Parties agree to use the
book value of the inventory of the corporation per the financial information
provided under Section 2.5 as the fair market value of the inventory and to
use the amount determined by Seller as the fair market value of the fixed
assets of the corporation on the effective date for all tax purposes. If a
separate corporate tax return is required through January 31, 2000, Kreisman,
Wolach & Williams, P.C. will prepare said corporate return.
2.12 NO MATERIAL ADVERSE CHANGE. To the best of Sellers' knowledge,
since the date of the Balance Sheet, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of the Company, and no event has occurred or circumstance exists that may result
in such a material adverse change.
2.13 CONTRACTS AND EMPLOYEE BENEFITS. Except as may be set forth in
Exhibit E, the Company is not a party to any contract or agreement that involves
annual payments by the Company in excess of $25,000, other than in the ordinary
course of business. The
<PAGE>
consummation of the transaction contemplated herein will not result in the
termination of any material agreement or contract to which the Company is a
party, nor give any party thereto the right to cancel or terminate any such
contract or agreement.
2.14 ERISA MATTERS. See Special Provisions, Exhibit F.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as may be set forth on
Exhibit G, the Company has not received any notice of any violation of any laws
or regulations that are or were applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets, which violation
has not been cured as of the Closing Date, and to the best knowledge of Sellers,
the Company is in full compliance with all such laws or regulations.
2.16 GOVERNMENTAL AUTHORIZATIONS. the Company has obtained all
governmental authorizations and permits that are necessary to permit the Company
to lawfully conduct and operate its business in the manner currently conducted.
2.17 LEGAL PROCEEDINGS. Except as disclosed in Exhibit H, there is no
material lawsuit or legal or administrative or regulatory proceeding or
investigation pending against the Company, or, to the best knowledge of Sellers,
threatened against the Company.
2.18 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as may be set forth
in Exhibit I, since the date of the Balance Sheet, the Company has conducted its
business only in the ordinary course of business and there has not been any:
(a) change in the Company authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock
of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the organizational documents of the Company;
(c) payment or increase by the Company of any extraordinary
bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the ordinary course of business) employee or
entry into any employment, severance, or similar contract with any
director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company;
<PAGE>
(e) material damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business,
financial condition, or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii)
any contract or transaction involving a total remaining commitment by
or to the Company of at least $25,000;
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company;
(h) cancellation or waiver of any claims or rights with a value
to the Company in excess of $25,000; or
(i) material change in the accounting methods used by the
Company.
2.19 INSURANCE. the Company maintains policies of insurance in such
amounts, with such deductibles and against such risks and losses as are, in its
judgment, reasonable for the business and assets of the Company, and Sellers
will deliver to Buyer on the Closing Date certificates of insurance setting
forth the name of the insurance company, policy number and type of coverage of
all insurance policies maintained as of the date hereof with respect to the
Company' business operations, property, plant and equipment.
2.20 ENVIRONMENTAL MATTERS. There are no pending or, to the knowledge
of Sellers and the Company, threatened claims, encumbrances, or other
restrictions of any nature, resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any environmental law, with respect
to or affecting any of the operations, properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
2.21 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Exhibits attached to this Agreement omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading. There is no
fact known to either Seller that has specific application to either Seller or
the Company (other than general economic or industry conditions) and that
materially adversely affects or, as far as either Seller can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Company (on a consolidated basis) that has not been
set forth in this Agreement or the Exhibits attached hereto.
2.22 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or
<PAGE>
other similar payment in connection with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nevada.
3.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms. Upon the execution and delivery by Buyer of the Employment
Agreements, and the Promissory Notes (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents. Except as set forth in Exhibit G, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions contemplated hereby will give any person the right to prevent,
delay, or otherwise interfere with any of the transactions contemplated hereby
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any legal requirement or order to which Buyer may be
subject; or
(iv) any contract to which Buyer is a party or by which Buyer may
be bound.
Except as set forth in Exhibit G, Buyer is not and will not be required to
obtain any Consent from any person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the transactions
contemplated hereby.
3.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
3.4 CERTAIN PROCEEDINGS. There is no pending legal proceeding that has
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
<PAGE>
To Buyer's knowledge, there exist no grounds for such proceeding, nor has any
such proceeding been threatened.
3.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of Buyer
or its officers or agents.
4. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
4.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Company and its
representatives to, (a) afford Buyer and its representatives and prospective
lenders and their representatives (collectively, "Buyer's Advisors") full and
free access to the Company' personnel, properties, contracts, books and records,
and other documents and data, (b) furnish Buyer and Buyer's Advisors with copies
of all such contracts, books and records, and other existing documents and data
as Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
4.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the
date of this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the ordinary
course of business;
(b) use their best efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of such the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with such the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the status
of the business, operations, and finances of the Company.
4.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any material change in the business of the
Company is likely to occur.
<PAGE>
4.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Company to, make all reports
and filings required by applicable laws and regulations to be made by them in
order to consummate the transactions contemplated hereby. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause the Company
to, (a) cooperate with Buyer with respect to all filings that Buyer elects to
make or is required by applicable laws and regulations to make in connection
with the transactions contemplated hereby, and (b) cooperate with Buyer in
obtaining all consents necessary or appropriate to consummate the transactions
contemplated hereby.
4.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or the Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in this Agreement or the Exhibits
attached to this Agreement, Sellers will promptly deliver to Buyer a supplement
to this Agreement or the Exhibits attached hereto specifying such change. During
the same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Section or of the occurrence of any
event that may make the satisfaction of the conditions to closing set forth in
this Agreement impossible or unlikely.
4.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to the
Company by either Seller or any related person of either Seller to be paid in
full prior to Closing.
4.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated, Sellers will not, and will cause the Company and each of their
representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the ordinary course
of business) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company.
4.8 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers will use their best efforts to cause the conditions to closing set
forth in this Agreement to be satisfied.
5. COVENANTS OF BUYER PRIOR TO CLOSING DATE
<PAGE>
5.1 APPROVALS OF GOVERNMENTAL AUTHORITIES. As promptly as practicable
after the date of this Agreement, Buyer will make all filings and obtain all
consents required by applicable laws and regulations in order to consummate the
transactions contemplated hereby.
5.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its best efforts to cause the conditions in Sections 6 and
7 to be satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
6.2 SELLERS' PERFORMANCE. All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects. Seller must have delivered each of the
documents required to be delivered by Seller pursuant to Section 1.5.1.
6.3 CONSENTS. Each of the consents required to consummate the
transactions contemplated hereby must have been obtained and must be in full
force and effect.
6.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against Buyer, or against any person
affiliated with Buyer, any proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
hereby, or (b) that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the transactions contemplated hereby.
6.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or threatened by any person any claim asserting that such
person (a) is the holder or the beneficial owner of, or has the right to acquire
or to obtain beneficial ownership of, any stock of, or any other voting, equity,
or ownership interest in the Company, or (b) is entitled to all or any portion
of the purchase price payable for the Shares.
<PAGE>
6.6 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any person affiliated with
Buyer to suffer any material adverse consequence under, any applicable laws or
regulations.
7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects. Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 1.5.2 and must have made
the cash payments required to be made by Buyer pursuant to Section 1.5.2.
7.3 CONSENTS. All of the consents required to be obtained from Buyer
must have been obtained and must be in full force and effect.
7.4 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Seller or any person affiliated with
Seller to suffer any material adverse consequence under, any applicable laws or
regulations.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material breach of any
provision of this Agreement has been committed by the other party and
such breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 6 has not
been
<PAGE>
satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before the Closing Date; or (ii)
by Sellers, if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Sellers to comply with their obligations under this Agreement) and
Sellers have not waived such condition on or before the Closing Date;
or
(c) by mutual consent of Buyer and Sellers.
8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 10.1 and 10.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY Knowledge. All
representations, warranties, covenants, and obligations in this Agreement and
the Exhibits attached hereto, will survive the Closing. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company, and
their respective representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
<PAGE>
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any and all loss, liability or damage suffered or incurred by
Buyer in respect of any debt, obligation or liability of the Company
or of Seller not disclosed in this Agreement, any of the Exhibits
attached hereto, or in writing to Buyer prior to the Closing Date;
(b) any breach of any representation or warranty made by Sellers
in this Agreement, the Exhibits attached hereto, or any other
certificate or document delivered by Sellers pursuant to this
Agreement;
(c) any breach of any representation or warranty made by Sellers
in this Agreement as if such representation or warranty were made on
and as of the Closing Date;
(d) any Breach by either Seller of any covenant or obligation of
such Seller in this Agreement;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either
Seller or the Company (or any person acting on their behalf) in
connection with any of the transactions contemplated hereby.
The remedies provided in this Section 9.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
damages arising, directly or indirectly, from or in connection with (a) any
breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
person with Buyer (or any person acting on its behalf) in connection with any of
the transactions contemplated hereby.
10. GENERAL PROVISIONS
10.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel, and accountants. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by
<PAGE>
another party.
10.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as the parties mutually
agree. Sellers and Buyer will consult with each other concerning the means by
which the Company's employees, customers, and suppliers and others having
dealings with the the Company will be informed of the transactions contemplated
hereby.
10.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the transactions contemplated hereby, unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, or (c) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. If the transactions contemplated hereby are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
10.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
Mitchell J. Martin
P.O. Box 16423
Denver, Colorado 80216-0423
Phone: (303)
Fax: (303)
Lloyd E. Peterman
P.O. Box 16423
Denver, Colorado 80216-0423
Phone: (303)
Fax: (303)
<PAGE>
with a copy to:
Fenton A. Bain, P.C.
3100 Arapahoe Avenue, Suite 400
Boulder, CO 80303
Phone: (303) 443-5083
Fax: (303) 443-5479
Buyer:
Venturi Technologies, Inc.
763 North 530 East
Orem, Utah 84097
Attn: Gaylord M. Karren, Chairman and CEO
Phone: (801) 235-9552
Fax: (801) 235-1731
(With a copy to Randy K. Johnson, Esq., Chief Counsel)
10.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Utah, County of Salt Lake, or, if it has or can acquire jurisdiction, in the
United States District Court for the Central District of Utah, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
10.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
10.7 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
<PAGE>
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
10.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated August 4, 1999)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
10.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
10.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
10.13 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Utah without regard to conflicts of laws principles.
10.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
<PAGE>
10.15 ESCROW DISBURSEMENTS AND REPORTS The Parties agree that with
each disbursement or release from Escrow that upon instructions all payments on
the Note may be made directly to the constituent parties comprising the Seller
Entities. VTI further agrees to forward a photocopy of all checks or wire
transfer debits made to the Escrow Agent.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
VENTURI TECHNOLOGIES, INC.
By:
-------------------------------------
Its:
--------------------------------
SELLERS:
-----------------------------------------
Mitchell J. Martin
-----------------------------------------
Lloyd E. Peterman
<PAGE>
EXHIBIT A
(Notice)
<PAGE>
EXHIBIT B
(Property and assets in need of maintenance or repairs)
<PAGE>
EXHIBIT C
(Pending or threatened, contest or claim challenging the validity of any of the
Accounts Receivable)
<PAGE>
EXHIBIT D
(Liabilities and Obligations)
<PAGE>
EXHIBIT E
(Contracts or Agreement that involve annual payments by the Company in excess of
$25,000)
<PAGE>
EXHIBIT F
<PAGE>
EXHIBIT F
(ERISA matters)
<PAGE>
EXHIBIT G
(Violation of any laws or regulations)
<PAGE>
EXHIBIT H
(Pending lawsuits or proceedings)
<PAGE>
EXHIBIT I
(Changes in stock, amendments to organizational documents, changes in financial
condition of the Company)
<PAGE>
STOCK PURCHASE AGREEMENT
(MPI of Oregon, Inc.)
This STOCK PURCHASE AGREEMENT is made as of February 1, 2000, by VENTURI
TECHNOLOGIES, INC., a Nevada corporation ("Buyer"), and MITCHELL J. MARTIN
("Martin") and LLOYD E. PETERMAN ("Peterman") (Martin and Peterman are
collectively referred to as "Sellers").
RECITALS
A. Sellers equally own all of the issued and outstanding capital stock (the
"Corporate Shares" or "Shares") of MPI of Oregon, Inc., an Oregon corporation
(hereinafter referred to as either "MPI/Oregon" or the "Company").
B. Sellers desire to sell, and Buyer desires to purchase, all of the
Corporate Shares (hereinafter "Shares") for the consideration and on the terms
set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
of this Agreement, at the Closing, Sellers will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Sellers.
1.2 PURCHASE PRICE.
1.2.1 CASH AND PROMISSORY NOTE. At the Closing, Buyer will pay or
deliver to Sellers the following as consideration for the Shares of MPI of
Oregon, Inc.:
(a) Forty-Three Thousand dollars ($43,000.00) cash at closing;
(b) A promissory note duly executed by Buyer in the principal amount
of Eighty-Six Thousand Dollars ($86,000.00), in the form and
pursuant to the terms of Exhibit K, attached hereto ("Installment
Promissory Note" .
1.2.2 VENTURI STOCK. As additional consideration for the Shares,
Buyer shall issue to Sellers Twenty One Thousand Five Hundred (21,500) shares of
Buyer's authorized but unissued $0.001 par value common stock. Said shares shall
be evidenced by two (2) separate certificates representing 10,750 shares issued
to each of the individuals
<PAGE>
comprising the Sellers.
1.2.3 ESCROW AND CERTIFICATES. The Venturi Shares shall be
subject to forfeiture if Sellers breach certain of the representations or
warranties in this Agreement, or if certain of the representations made by
Sellers in this Agreement turn out to be untrue, as shall be more fully set
forth in the Restated Global Escrow Agreement, as amended. The Venturi Shares
shall be held by Escrow Agent pursuant to the terms of the Restated Global
Escrow Agreement, as amended. The certificates representing the Venturi Shares
shall contain, for so long as the Venturi Shares are held in escrow, a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE AND
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING AN AGREEMENT
BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE THAT THE SHARES MAY NOT BE OFFERED OR SOLD FOR A CERTAIN
PERIOD OF TIME AFTER THE DATE OF ISSUANCE.
1.2.4 RESTRICTED STOCK. The Venturi Shares have not been
registered with the Securities and Exchange Commission, nor have the Venturi
Shares been qualified under the securities laws of any state. The Sellers
acknowledge that the Venturi Shares are subject to the following restriction
which will be printed in the following form on the certificates representing the
Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES NOR ANY INTEREST THEREIN
MAY BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND QUALIFICATION UNDER THE LAW OR
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE OR OFFER.
Sellers represent the following to Purchaser in order to establish exemptions
from registration under Federal and state securities laws. Sellers are acquiring
the Shares for their own account, for investment, and not for resale in
connection with any distribution thereof. Sellers have such knowledge and
experience in business and financial matters that they are capable of evaluating
the risks of obtaining the Shares. Sellers understand the speculative nature of
the Shares. Sellers have adequate net worth and means to provide for their
current needs and to sustain a complete loss of their investment. Sellers have
no need of liquidity of their investment. Sellers understand that at present
only a limited public market exists, and that a
<PAGE>
more general public market may never exist, for the Shares and that the
Purchaser is under no obligation to provide a market for the Shares.
1.3 CONSENT TO DILUTION. Sellers understand that Purchaser plans to
acquire other businesses and assets by issuing stock, and that Purchaser may
issue shares of its stock for other reasons in the future. Sellers understand
and consent that future issuance of stock will dilute Sellers' proportionate
ownership of Purchaser.
1.4 CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place at a time, place and date agreed to mutually by
the Parties.
1.5 CLOSING DELIVERIES.
1.5.1 SELLERS' DOCUMENTS. At the Closing, Sellers will deliver to
Escrow Agent:
(a) original certificates representing the Corporate Shares
duly endorsed (or accompanied by duly executed stock powers);
(b) Restated Global Escrow Agreement, as amended, executed
by Sellers, Buyer and the Escrow Agent;
(c) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and
warranties in this Agreement was accurate in all respects as of
the date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date.
1.5.2 BUYER'S DOCUMENTS. At the Closing, Buyer will deliver to
Escrow Agent:
(a) cash in the amount of $43,000;
(b) the Installment Promissory Note in the principal amount
of $86,000.00;
(c) two (2) certificates representing 10,750 shares each of
Buyer's $0.001 par value common stock in the name of each
respective individual shareholder; and
(d) a certificate executed by Buyer to the effect that each
of Buyer's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date.
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
To the best of their individual and collective knowledge and belief,
Sellers represent and warrant to Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. (a) the Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Oregon, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under applicable
contracts. the Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification.
2.2 AUTHORITY. This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Sellers have the absolute and unrestricted right, power, authority, and capacity
to execute, deliver and perform their obligations under this Agreement.
2.3 NO CONFLICT. Neither the execution and delivery of this Agreement
nor the consummation or performance of any of the contemplated transactions by
Sellers will violate or constitute a default under any mortgage, indenture, deed
of trust, lease, contract, agreement, license or other instrument or any order,
judgement or ruling of any governmental authority to which either Seller is
subject, or to the best knowledge of Sellers, any of the property of the Company
is bound, or result in the creation of any mortgage, pledge, lien, charge or
encumbrance upon any of the assets of the Company or the loss of any license or
other contractual right with respect thereto, except in each case for any of the
foregoing which is not, individually or in the aggregate, material to the
Company.
Except as may be set forth in Exhibit A, no Seller or the Company is or
will be required to give any notice to or obtain any consent from any person in
connection with the execution and delivery of this Agreement or the consummation
or performance of the transaction contemplated hereby.
Sellers are acquiring the Promissory Notes and the shares of Buyer's common
stock for their own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act. Each Seller is an "accredited
investor" as such term is defined in Rule 501(a) under the Securities Act of
1933, as amended, (the "Securities Act") and the rules and regulations
promulgated thereunder.
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 1,000 authorized shares of common stock, par value $0.00 per share,
of which 500 shares are issued and outstanding and constitute the Shares.
Sellers are and will be on the Closing Date
<PAGE>
the record and beneficial owners and holders of the Shares, free and clear of
all Encumbrances. Martin owns 1,000 of the Shares and Peterman owns 1,000 of the
Shares. No legend or other reference to any purported Encumbrance appears upon
any certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
state law regulating the sale and issuance of securities. the Company does not
own, nor does it have any Contract to acquire, any equity securities or other
securities of any other business or any direct or indirect equity or ownership
interest in any other business.
2.5 FINANCIAL STATEMENTS. Sellers have delivered to Buyer an unaudited
balance sheet of the Company as of January 31, 2000 (the "Balance Sheet"), and
the related unaudited statements of income, changes in stockholders' equity, and
cash flow for each of the periods then ended. Such financial statements and
notes were prepared in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the balance sheet); the financial statements referred to in this
Section reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to such
financial statements. No financial statements of any person or entity other than
the Company are required by GAAP to be included in the consolidated financial
statements of the Company. See Exhibit J.
2.6 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the stockholders, the Boards of Directors, and committees of
the Boards of Directors of the Company. At the Closing, all of those books and
records will be in the possession of the Company.
2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Sellers have delivered to Buyer
a complete and accurate list of all real and personal property interests owned
by the Company. the Company owns all the properties and assets that have been
disclosed to Buyer. All material properties disclosed as being owned by the
Company are owned free and clear of all liens and encumbrances except as
previously disclosed in writing to Buyer.
2.8 CONDITION AND SUFFICIENCY OF ASSETS. To the best of Sellers'
knowledge, except as set forth in Exhibit B, the Company' property and assets
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such property and assets are in need of
maintenance or repairs except for ordinary, routine
<PAGE>
maintenance and repairs that are not material in nature or cost. The property
and assets of the Company are sufficient for the continued conduct of the
Company' business after the Closing in substantially the same manner as
conducted prior to the Closing.
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected in the accounting records of the Company as of the Closing Date
(collectively, the "Accounts Receivable") represent valid obligations arising
from sales actually made or services actually performed in the ordinary course
of business. To the best of Sellers' knowledge, unless paid prior to the Closing
Date, the Accounts Receivable are or will be as of the Closing Date current and
collectible. Absent any unforeseen events, each of the Accounts Receivable
historically has been collected in full within ninety days after the day on
which it first becomes due and payable. Except as may be set forth on Exhibit C
referred to below, there is not any pending, or to Sellers' knowledge
threatened, contest or claim challenging the validity of any of the Accounts
Receivable.
2.10 NO UNDISCLOSED LIABILITIES. Except as may be set forth in Exhibit
D, the Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the ordinary course of business.
2.11 TAXES. To the best of Sellers' knowledge, the Company has
filed or caused to be filed within the past five (5) years all tax returns
that are or were required to be filed by or with respect to the Company,
pursuant to applicable laws and regulations (except use tax returns). Sellers
have delivered or made available to Buyer copies of all such tax returns
filed since 1997. To the best of Sellers' knowledge, all tax returns filed by
the Company are true, correct, and complete. Sellers agree to cooperate in
the event Buyer makes an election under Reg. Section 1.338(h)(10)-1T. The
Parties agree to use the book value of the inventory of the corporation per
the financial information provided under ss.2.5 as the fair market value of
the inventory and to use the amount determined by Seller as the fair market
value of the fixed assets of the Corporation on the effective date for all
tax purposes. Sellers will be responsible for taxes on income earned only
through 1/31/00. Kreisman, Wolach & Williams, P.C. will prepare said
corporate return through 1/31/00.
2.12 NO MATERIAL ADVERSE CHANGE. To the best of Sellers' knowledge,
since the date of the Balance Sheet, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of the Company, and no event has occurred or circumstance exists that may result
in such a material adverse change.
2.13 CONTRACTS AND EMPLOYEE BENEFITS. Except as may be set forth in
Exhibit E, the Company is not a party to any contract or agreement that involves
annual payments by the Company in excess of $25,000, other than in the ordinary
course of business. The consummation of the transaction contemplated herein will
not result in the termination of any
<PAGE>
material agreement or contract to which the Company is a party, nor give any
party thereto the right to cancel or terminate any such contract or agreement. A
list of Employees and benefits are contained in Exhibit N.
2.14 ERISA MATTERS. See Special Provisions, Exhibit F.
2.15 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as may be set forth on
Exhibit G, the Company has not received any notice of any violation of any laws
or regulations that are or were applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets, which violation
has not been cured as of the Closing Date, and to the best knowledge of Sellers,
the Company is in full compliance with all such laws or regulations.
2.16 GOVERNMENTAL AUTHORIZATIONS. the Company has obtained all
governmental authorizations and permits that are necessary to permit the Company
to lawfully conduct and operate its business in the manner currently conducted.
See Exhibit L.
2.17 LEGAL PROCEEDINGS. Except as disclosed in Exhibit H, there is no
material lawsuit or legal or administrative or regulatory proceeding or
investigation pending against the Company, or, to the best knowledge of Sellers,
threatened against the Company.
2.18 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as may be set forth
in Exhibit I, since the date of the Balance Sheet, the Company has conducted its
business only in the ordinary course of business and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock
of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the organizational documents of the Company;
(c) payment or increase by the Company of any extraordinary
bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the ordinary course of business) employee or
entry into any employment, severance, or similar contract with any
director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company;
<PAGE>
(e) material damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business,
financial condition, or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii)
any contract or transaction involving a total remaining commitment by
or to the Company of at least $25,000;
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company;
(h) cancellation or waiver of any claims or rights with a value
to the Company in excess of $25,000; or
(i) material change in the accounting methods used by the
Company.
2.19 INSURANCE. the Company maintains policies of insurance in such
amounts, with such deductibles and against such risks and losses as are, in its
judgment, reasonable for the business and assets of the Company, and Sellers
will deliver to Buyer on the Closing Date certificates of insurance setting
forth the name of the insurance company, policy number and type of coverage of
all insurance policies maintained as of the date hereof with respect to the
Company' business operations, property, plant and equipment. See Exhibit M.
2.20 ENVIRONMENTAL MATTERS. There are no pending or, to the knowledge
of Sellers and the Company, threatened claims, encumbrances, or other
restrictions of any nature, resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any environmental law, with respect
to or affecting any of the operations, properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
2.21 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Exhibits attached to this Agreement omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading. There is no
fact known to either Seller that has specific application to either Seller or
the Company (other than general economic or industry conditions) and that
materially adversely affects or, as far as either Seller can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Company (on a consolidated basis) that has not been
set forth in this Agreement or the Exhibits attached hereto.
<PAGE>
2.22 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nevada.
3.2 AUTHORITY; NO CONFLICT. This Agreement constitutes the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms. Upon the execution and delivery by Buyer of the Employment
Agreements, and the Promissory Notes (collectively, the "Buyer's Closing
Documents"), the Buyer's Closing Documents will constitute the legal, valid, and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's
Closing Documents. Except as set forth in Exhibit G, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
transactions contemplated hereby will give any person the right to prevent,
delay, or otherwise interfere with any of the transactions contemplated hereby
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any legal requirement or order to which Buyer may be
subject; or
(iv) any contract to which Buyer is a party or by which Buyer may
be bound.
Except as set forth in Exhibit G, Buyer is not and will not be required to
obtain any Consent from any person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the transactions
contemplated hereby.
3.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
3.4 CERTAIN PROCEEDINGS. There is no pending legal proceeding that has
<PAGE>
been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's knowledge, there exist no grounds for such
proceeding, nor has any such proceeding been threatened.
3.5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through Buyer as a result of the action of Buyer
or its officers or agents.
4. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
4.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Company and its
representatives to, (a) afford Buyer and its representatives and prospective
lenders and their representatives (collectively, "Buyer's Advisors") full and
free access to the Company' personnel, properties, contracts, books and records,
and other documents and data, (b) furnish Buyer and Buyer's Advisors with copies
of all such contracts, books and records, and other existing documents and data
as Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
4.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES. Between the
date of this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the ordinary
course of business;
(b) use their best efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of such the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with such the Company;
(c) confer with Buyer concerning operational matters of a
material nature; and
(d) otherwise report periodically to Buyer concerning the status
of the business, operations, and finances of the Company.
4.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and
<PAGE>
will cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any material change in the business of the Company
is likely to occur.
4.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Company to, make all reports
and filings required by applicable laws and regulations to be made by them in
order to consummate the transactions contemplated hereby. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause the Company
to, (a) cooperate with Buyer with respect to all filings that Buyer elects to
make or is required by applicable laws and regulations to make in connection
with the transactions contemplated hereby, and (b) cooperate with Buyer in
obtaining all consents necessary or appropriate to consummate the transactions
contemplated hereby.
4.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or the Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in this Agreement or the Exhibits
attached to this Agreement, Sellers will promptly deliver to Buyer a supplement
to this Agreement or the Exhibits attached hereto specifying such change. During
the same period, each Seller will promptly notify Buyer of the occurrence of any
Breach of any covenant of Sellers in this Section or of the occurrence of any
event that may make the satisfaction of the conditions to closing set forth in
this Agreement impossible or unlikely.
4.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers will cause all indebtedness owed to the
Company by either Seller or any related person of either Seller to be paid in
full prior to Closing.
4.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated, Sellers will not, and will cause the Company and each of their
representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the ordinary course
of business) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company.
4.8 BEST EFFORTS. Between the date of this Agreement and the Closing
<PAGE>
Date, Sellers will use their best efforts to cause the conditions to closing set
forth in this Agreement to be satisfied.
5. COVENANTS OF BUYER PRIOR TO CLOSING DATE
5.1 APPROVALS OF GOVERNMENTAL AUTHORITIES. As promptly as practicable
after the date of this Agreement, Buyer will make all filings and obtain all
consents required by applicable laws and regulations in order to consummate the
transactions contemplated hereby.
5.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its best efforts to cause the conditions in Sections 6 and
7 to be satisfied.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
6.2 SELLERS' PERFORMANCE. All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects. Seller must have delivered each of the
documents required to be delivered by Seller pursuant to Section 1.5.1.
6.3 CONSENTS. Each of the consents required to consummate the
transactions contemplated hereby must have been obtained and must be in full
force and effect.
6.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against Buyer, or against any person
affiliated with Buyer, any proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
hereby, or (b) that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the transactions contemplated hereby.
6.5 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or threatened by any person any claim asserting that such
person (a) is the
<PAGE>
holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting, equity, or ownership
interest in the Company, or (b) is entitled to all or any portion of the
purchase price payable for the Shares.
6.6 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any person affiliated with
Buyer to suffer any material adverse consequence under, any applicable laws or
regulations.
7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 BUYER'S PERFORMANCE. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects. Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 1.5.2 and must have made
the cash payments required to be made by Buyer pursuant to Section 1.5.2.
7.3 CONSENTS. All of the consents required to be obtained from Buyer
must have been obtained and must be in full force and effect.
7.4 NO PROHIBITION. Neither the consummation nor the performance of
any of the transactions contemplated hereby will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Seller or any person affiliated with
Seller to suffer any material adverse consequence under, any applicable laws or
regulations.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
<PAGE>
(a) by either Buyer or Sellers if a material breach of any
provision of this Agreement has been committed by the other party and
such breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 6 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before the Closing Date; or (ii)
by Sellers, if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Sellers to comply with their obligations under this Agreement) and
Sellers have not waived such condition on or before the Closing Date;
or
(c) by mutual consent of Buyer and Sellers.
8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 8.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 10.1 and 10.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement and
the Exhibits attached hereto, will survive the Closing. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
<PAGE>
9.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company, and
their respective representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any and all loss, liability or damage suffered or incurred by
Buyer in respect of any debt, obligation or liability of the Company or of
Seller not disclosed in this Agreement, any of the Exhibits attached
hereto, or in writing to Buyer prior to the Closing Date;
(b) any breach of any representation or warranty made by Sellers in
this Agreement, the Exhibits attached hereto, or any other certificate or
document delivered by Sellers pursuant to this Agreement;
(c) any breach of any representation or warranty made by Sellers in
this Agreement as if such representation or warranty were made on and as of
the Closing Date;
(d) any Breach by either Seller of any covenant or obligation of such
Seller in this Agreement;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or the
Company (or any person acting on their behalf) in connection with any of
the transactions contemplated hereby.
The remedies provided in this Section 9.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons.
9.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
damages arising, directly or indirectly, from or in connection with (a) any
breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any breach by
Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim
by any person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
person with Buyer (or any person acting on its behalf) in connection with any of
the transactions contemplated hereby.
<PAGE>
10. GENERAL PROVISIONS
10.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel, and accountants. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
10.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as the parties mutually
agree. Sellers and Buyer will consult with each other concerning the means by
which the Company' employees, customers, and suppliers and others having
dealings with the Company will be informed of the transactions contemplated
hereby.
10.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement
or the transactions contemplated hereby, unless (a) such information is already
known to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, or (c) the furnishing or use of such
information is required by or necessary or appropriate in connection with legal
proceedings. If the transactions contemplated hereby are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
10.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
Mitchell J. Martin
P.O. Box 16423
<PAGE>
Denver, Colorado 80216-0423
Phone: (303)
Fax: (303)
Lloyd E. Peterman
P.O. Box 16423
Denver, Colorado 80216-0423
Phone: (303)
Fax: (303)
with a copy to:
Fenton A. Bain, P.C.
3100 Arapahoe Avenue, Suite 400
Boulder, CO 80303
Phone: (303) 443-5083
Fax: (303) 443-5479
Buyer:
Venturi Technologies, Inc.
763 North 530 East
Orem, Utah 84097
Attn: Gaylord M. Karren, Chairman and CEO
Phone: (801) 235-9552
Fax: (801) 235-1731
(With a copy to Randy K. Johnson, Esq., Chief Counsel)
10.5 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Utah, County of Salt Lake, or, if it has or can acquire jurisdiction, in the
United States District Court for the Central District of Utah, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
10.6 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
10.7 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any
<PAGE>
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
10.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated August 4, 1999)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
10.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, except that Buyer may assign any of its rights under this
Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
10.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
10.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "
<PAGE>
including" does not limit the preceding words or terms.
10.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
10.13 GOVERNING LAW. This Agreement will be governed by the laws of
the State of Utah without regard to conflicts of laws principles.
10.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
10.15 ESCROW DISBURSEMENTS AND REPORTS. The Parties agree that with
each disbursement or release from Escrow that upon instructions all payments on
the Note may be made directly to the constituent parties comprising the Seller
Entities. VTI further agrees to forward a photocopy of all checks or wire
transfer debits made to the Escrow Agent.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
VENTURI TECHNOLOGIES, INC.
By:
----------------------------------------
Its:
-----------------------------------
SELLERS:
--------------------------------------------
Mitchell J. Martin
--------------------------------------------
Lloyd E. Peterman
<PAGE>
EXHIBIT A
(Notice)
<PAGE>
EXHIBIT B
(Property and assets in need of maintenance or repairs)
<PAGE>
EXHIBIT C
(Pending or threatened, contest or claim challenging the validity of any of the
Accounts Receivable)
<PAGE>
EXHIBIT D
(Liabilities and Obligations)
<PAGE>
EXHIBIT E
(Contracts or Agreement that involve annual payments by the Company in excess of
$25,000)
<PAGE>
EXHIBIT F
<PAGE>
EXHIBIT F
(ERISA matters)
<PAGE>
EXHIBIT G
(Violation of any laws or regulations)
<PAGE>
EXHIBIT H
(Pending lawsuits or proceedings)
<PAGE>
EXHIBIT I
(Changes in stock, amendments to organizational documents, changes in financial
condition of the Company)
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF PERCENTAGE INTEREST
OF PARTNERSHIP
(MPI OF GEORGIA)
THIS AGREEMENT FOR PURCHASE AND SALE OF PERCENTAGE INTEREST OF PARTNERSHIP
is entered into with an effective date as of February 1, 2000, by and between
VENTURI TECHNOLOGIES, INC., a Nevada corporation having its principal office at
763 North 530 East, Orem, Utah 84097 ("Purchaser") and McNAMARA ENTERPRISES,
INC., a Georgia Corporation ("Seller").
WHEREAS, Seller is a co-partner, with ALL FOURS DISTRIBUTING, INC., a
Colorado corporation ("All Fours") with respect to that certain general
partnership, organized and existing under Colorado law, commonly known and
referred to as "MPI of Georgia" ("Partnership"); and together, All Fours and
Seller collectively comprise one hundred percent (100%) of the Partnership; and
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser all of the Seller's interest in and to the Partnership in
exchange for cash, a promissory note, assumption by Purchaser of certain
liabilities, and Purchaser's conveyance of an amount of its common stock upon
the terms described in this Agreement and the original Restated Global Agreement
of Purchase and Sale, dated October 16, 1999, as later amended by Amendment No.
1, dated as of January 24, 2000 (hereinafter collectively "Global Agreement").
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
the parties agree as follows:
1. PURCHASE OF PARTNERSHIP INTEREST. Seller shall assign, transfer, convey
and deliver to the Purchaser its total percentage interest in and to the
Partnership which said Partnership owns certain properties, assets, claims,
contracts and businesses of every kind, character and description, whether
tangible or intangible, whether accrued, contingent or otherwise, and wherever
located (each of which is referred to as an "Asset" and cumulatively referred to
as "Business Assets") relating to or comprising the Business; and including,
without limitation, all equipment and machinery; goodwill and all unfilled
customer orders or service requests; all inventories, accounts receivable, cash
on hand and petty cash, prepayments, notes receivable, advances, deposits and
other receivables; all leaseholds, fixtures and leasehold improvements; all
supplies, vehicles, furniture, office furnishings and fixtures; all claims,
rights and benefits under contracts, purchase orders or otherwise; all coverage
under Seller's existing insurance policies (if VTI so elects); all trade names
and service marks and registrations and applications therefor, trademarks,
trademark applications and registrations, copyright applications and
registrations, patents and patent applications and registrations; all trade
secrets, know-how, licenses, processes, formulae, royalties, customer lists and
<PAGE>
files, inventories, discoveries, improvements, proprietary or technical
information, computer hardware and software, data, plans, specifications,
drawings and the like, all memberships; all financial, inventory, marketing,
personnel, and other books and records, product literature and advertising;
governmental permits, approvals and authorization (excluding telephone
exchange); all business records and plans, all licenses, assignments, secrecy
and royalty agreements relating to any proprietary rights or trade secrets; and
(i) all of Seller's interest in and to the Partnership reflected on
the Balance Sheet of the Business Operation as of the Closing Date; and
(ii) all of Seller's interest in and to the Partnership of a nature
not normally reflected on a Balance Sheet in accordance with generally accepted
accounting principles which are used primarily in or are primarily related to
the Business; and
(iii) any interest in the certain Partnership held by other divisions
or affiliates of the Seller set forth on Exhibit A attached to this Agreement,
if any.
The interest described above and as set forth within Exhibit A are referred to
collectively as the "Seller's Percentage Interest of Partnership. For purposes
of this and any companion agreement dealing with Purchaser's acquisition of the
Seller's Partnership Interest, Seller shall be deemed to own an undivided
forty-nine percent (49%) interest and All Fours shall be deemed the owner of the
balance of the Partnership. By virtue of a companion Stock Purchase Agreement of
even date, the shareholders of All Fours are selling their total interests in
and to the corporate stock to Purchaser. It is the intent of the Parties that
said transactions will vest one hundred percent (100%) of the Partnership
Interest of MPI of Georgia into Purchaser.
2. PAYMENT FOR SELLER'S INTEREST.
2.1 The payment for the Seller's interest in and to the Partnership
shall be in the monetary equivalent amount of $367,500 comprised of
the following:
2.1.1 CASH AND PROMISSORY NOTE. At the Closing, Purchaser will
pay or deliver to Escrow Agent the following as partial consideration for the
Seller's interest:
(a) $73,500.00 cash at closing;
(b) A promissory note duly executed by Purchaser in the
principal amount of $147,000.00 in the form and pursuant to
the terms of Exhibit B, attached hereto.
2.1.2 VENTURI STOCK. As additional consideration for the
acquisition
<PAGE>
of Seller's Interest, Purchaser shall issue to Seller and deliver to the Escrow
Agent 36,750 shares of Purchaser's authorized but unissued $0.001 par value
common stock ("Venturi Shares").
2.1.3 LIABILITIES UNDERTAKING. At the Closing, Purchaser shall
also execute a "Liabilities Undertaking" in the form of the attached Exhibit
"C", pursuant to which Purchaser agrees to pay or discharge the obligations
specifically set forth therein.
3. CLOSING. The consummation of the purchase and sale of the Business
Assets as provided for in this Agreement will take place by the execution of
documents in Boulder, Colorado by the appropriate and designated signatories
("Closing").
4. SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.
4.1 At the Closing, Seller shall arrange for delivery to the Escrow
Agent:
4.1.1 a Bill of Sale and Assignment signed by Seller in the form
attached as Exhibit "D";
4.1.2 any other instruments of assignment and transfer necessary
to vest in Purchaser good and marketable title to Seller's Partnership Interest;
4.1.3 all contracts and records relating to Seller's Partnership
Interest;
4.1.4 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and Seller
must sign and/or deliver any documents necessary to transfer and assign to
Purchaser, and confirm Purchaser's title to Seller's Partnership Interest, and
to assist Purchaser in the exercise of all rights thereto. After the Closing,
Seller shall have access to the books and records pertaining to its pre-closing
operations.
4.3 Purchaser shall have the right to collect any receivables that may
be transferred to Purchaser under this Agreement as of the Closing date and to
endorse Seller's name on checks received for such receivables. Seller shall
transfer to Purchaser any cash or other property Seller receives for such
receivables.
4.4 The Parties agree that with each disbursement or release from
Escrow that all payments on the Note may be made directly to the Seller. VTI
further agrees to forward a photocopy of all checks or wire transfer debits made
to the Escrow Agent.
5. REPRESENTATIONS AND WARRANTIES BY SELLER. To the best of its knowledge
and belief, Seller represents and warrants to Purchaser as follows:
<PAGE>
5.1 ORGANIZATION, STANDING AND QUALIFICATION. MPI of Georgia is a
general partnership duly organized, validly existing and in good standing under
the laws of the State of Georgia. All Fours is the holder of a 51% partnership
interest therein, and Seller, a Georgia corporation, is the holder of a 49%
partnership interest therein. Seller has all requisite power and authority and
is entitled to carry on its business as now being conducted and to own, lease or
operate its properties as and in the places where such business is now
conducted.
5.2 EXECUTION AND PERFORMANCE OF AGREEMENT; AUTHORITY. The performance
of this Agreement by Seller will not result in a default or breach of any other
agreement to which Seller or All Fours is a party. Seller, All Fours and their
respective signatures have the authority to enter into and consummate this
transaction.
5.3 FINANCIAL STATEMENTS. The copies of the following financial
statements given to Purchaser and prepared by Seller's representatives (called
the "Financial Statements") are complete and correct, have been prepared from
the records of MPI of Georgia in accordance with generally accepted accounting
principles.
5.3.1 Unaudited balance sheet of MPI of Georgia (the "Balance
Sheet") as of January 31, 2000 (the "Balance Sheet Date"); MPI of Georgia's
unaudited income or cash flow statement for the period 12/26/00 to 1/31/00. Also
attached as Exhibit G is unaudited Balance Sheet for the period 12/26/99 to
1/31/00.
Such statements of earnings do not contain any items of special income or any
other income not earned in the ordinary course of business except as specified
therein, and such interim financial statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
5.4 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in Exhibit
D or on the Balance Sheet, as of the Balance Sheet Date MPI of Georgia had no
debts or obligations of any nature whatsoever, including any tax liabilities
incurred in respect of its income, or its period prior to the close of business
on the Balance Sheet Date or any other debts or obligations relating to any act,
omission or other condition which occurred or existed on or before the Balance
Sheet Date.
5.5 TAXES. All taxes and assessments imposed by any taxing
authority, whether federal, state, local, foreign or otherwise which are due
or payable by Seller and/or MPI of Georgia, and all interest and penalties
thereon, have been paid in full (except Use tax returns). All tax returns
required to be filed have been accurately prepared and filed and all deposits
required to be made by Seller and or MPI of Georgia with respect to
employees' withholding taxes have been made. Seller and Purchaser agree that
Seller is responsible for taxes only on the income of the Partnership through
January 31, 2000. Accordingly, Purchaser agrees to terminate the Partnership
pursuant to IRC Section 708(b)(1) upon the consummation of this transaction
and in conjunction with the closing of the Stock Purchase Agreement for All
Fours effective as of the commencement of business on February 1, 2000. The
accounting firm of Kreisman, Wolach and Williams, P.C. will prepare the
Partnership return through January 31, 2000. Seller and Purchaser agree to
use the book value of the inventory
<PAGE>
for the Partnership in conformity with the Financial Statements as the fair
market value of such inventory and to use the amounts determined by the
Seller as the fair market value of the fixed assets of the Partnership as of
January 31, 2000 for all tax purposes. Seller and All Fours agree to make an
election under IRC Section 754 on the January 31, 2000 Partnership return if
so requested by Buyer on or before May 1, 2000.
5.6 ABSENCE OF CHANGES OR EVENTS. Between the Balance Sheet Date and
the Closing Date, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of the
Partnership, and no event has occurred or circumstance exists that may result in
such a material adverse change.
5.7 LITIGATION. To the best of its knowledge, there is no claim,
order, investigation or other proceeding against Seller and/or MPI of Georgia,
its employees, its properties, or business or the transactions contemplated by
this Agreement, and Seller knows of no basis for the same.
5.8 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the best of
Seller's knowledge MPI of Georgia has complied with all laws applicable to its
business and the ownership and use of Business Assets as well as the conduct of
its business will not conflict with the rights of any other person or entity,
and will not cause a default under any agreement to which Seller and/or MPI of
Georgia is a party. Seller is not aware of any proposed laws, condemnations or
other proceedings which would adversely effect the Partnership or its business
undertakings.
5.9 TITLE TO PROPERTIES. Seller has a valued percentage interest in
and to Partnership. Neither the Partnership Interest nor the Business Assets are
subject to any lien, lease, license, or adverse claim except (i) as expressly
set forth in the schedules attached to this Agreement, or (ii) insubstantial
imperfections of title which have arisen in the ordinary course of business. To
the best of Seller's knowledge, except as set forth in the schedules attached to
this Agreement, the Business Assets are in good operating condition and repair,
are suitable for the purposes used, and are adequate for all current operations.
5.10 ENVIRONMENTAL COMPLIANCE. To the best of Seller's and MPI of
Georgia's knowledge: (a) the Partnership is being operated in compliance with
all environmental laws and with all terms of required permits and licenses, (b)
Seller is not aware of any circumstances that may interfere with its compliance
with environmental laws or which may give rise to any liability, or which would
otherwise form the basis of any claim or investigation, and that is based on
Seller's manufacture, storage, disposal, transport, or handling, or the release
into the environment, of any hazardous substance, (c) Seller is unaware of any
claim, investigation, or proceeding pending or threatened against Seller and/or
MPI of Colorado, in connection with the Business Assets or its business relating
to environmental laws, and (d) Seller currently maintains all material
government permits, licenses and agreements required to operate the Partnership
and its business, and has complied with all requirements relating thereto.
5.11 SCHEDULES. Exhibit E contains a complete list and description of:
<PAGE>
5.11.1 All real property in which Seller has any ownership or
other interest and which is used in connection with the operation of its
business.
5.11.2 All equipment, motor vehicles, and other personal property
(other than inventory and supplies), owned or leased by Seller setting forth a
summary description of all leases, claims, and conditions relating thereto.
5.11.3 All patents, trademarks, service marks, service names,
trade names, and copyrights together with any registrations, applications and
licenses related thereto, owned by Seller and/or MPI of Georgia, or used in the
Business Operation.
5.11.4 All insurance policies insuring Seller or MPI of Georgia
or its assets, specifying the name of the insurer, the risk insured against, the
limits of coverage, the deductible amount, the premium rate and the date through
which coverage will continue by virtue of premiums already paid.
5.11.5 All contracts or agreements relating to the Partnership or
Business Assets to which Seller is a party.
5.11.6 All employment and consulting agreements, compensation
plans, pension plans or retirement plans, group life, health and accident
insurance and other employee benefit plans, including holiday, vacation,
Christmas and other bonus practices, to which Seller is a party.
To the best of Seller's knowledge, all of the agreements, leases and licenses
required to be listed on Exhibit E (other than those which have been fully
performed) are valid and binding. Except as disclosed in Exhibit E, no payment
required to be made under any such agreement, lease or license has been prepaid
more than 30 days prior to its due date, and there is not any default, or event
which would constitute a default, and none of such agreements, leases or
licenses is unduly burdensome or adverse to Seller's Assets or business or
likely to result in any material loss or liability. None of Seller's existing or
completed contracts is subject to renegotiation with any government body.
5.12 NO GUARANTIES. No obligation of MPI of Georgia is guaranteed by
any other person or entity, nor has Seller guaranteed any obligation of any
other person or entity.
5.13 RECEIVABLES. All of the prior receivables have arisen only from
transactions in the ordinary course of business and are customarily collectible
within 90 days after each receivable arose, without offset or resort to
litigation.
5.14 RECORDS. The accounting books of the Partnership are complete and
correct, and to the best of Seller's knowledge, no transactions which are
required to be recorded therein have been omitted.
5.15 DISCLOSURE. All of Seller's representations made in this
Agreement
<PAGE>
and its related documents are true and contain no untrue statements and do not
omit important facts. Seller has disclosed to Purchaser in writing all the
adverse facts concerning the Business Assets, the Partnership and its business
operation.
5.16 NO CONFLICT. To the best of Seller's knowledge, performance of
this Agreement by Seller will not conflict with any regulations or agreements to
which Seller is a party. No authorization or filing, which has not already been
completed, is necessary for Seller to perform this Agreement.
6. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller as follows:
6.1 ORGANIZATION. Purchaser is a corporation organized and in good
standing under the laws of the State of Nevada and has full authority to enter
into this Agreement and to carry on its business and to own and operate its
properties.
6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. All actions required to
be taken by Purchaser relating to the signing of this Agreement shall have been
taken at or prior to the Closing.
6.3 EXECUTION AND PERFORMANCE OF AGREEMENT. The performance of this
Agreement by Purchaser will not result in a default of any other agreement to
which Purchaser is a party. Purchaser has the authority to enter into this
Agreement.
6.4 LITIGATION. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. CONDUCT OF BUSINESS PRIOR TO CLOSING.
7.1 Prior to the Closing, the Partnership shall be conducted in a
manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of Seller intact, (ii) to keep available the services
of Seller's present employees, agents and independent contractors, (iii) to
preserve the goodwill of Seller's suppliers, customers, landlords and others
having business relations with it, and (iv) to cooperate with Purchaser and
assist in obtaining the consent of any party to any lease or contract with
Seller where the consent of such party may be required by reason of this
Agreement.
7.2 If there is a change in any information contained in this
Agreement or its related documents prior to closing, Seller shall give Purchaser
prompt written notice.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) canceling agreements to which Seller is a party,
including purchase orders and commitments for capital expenditures or
improvements, (ii) discontinuing particular items or operations and (iii)
purchasing, pricing or selling policy
<PAGE>
(including offering services at discounts); provided, however, that nothing
contained in this Section shall require Seller to take action that is likely to
result in a penalty or claim for damages against Seller, or in losses to Seller,
or to interfere with the conduct of Seller's business consistent with prior
practice, or to result in a breach by Seller of any of its representations
contained in this Agreement (unless the breach is waived by Purchaser).
8. ACCESS TO INFORMATION AND DOCUMENTS. Upon Purchaser's request, Seller
shall give Purchaser access to Seller's personnel and all its properties,
documents and records and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same prior to the
Closing.
9. EMPLOYMENT MATTERS.
9.1 Purchaser shall offer employment to those current employees of
Seller that are listed on Exhibit F attached hereto, at the compensation listed
therein.
9.2 Within a reasonable period following the Closing Date Purchaser
shall provide training and support to Seller's employees to enable them to use
and sell Purchaser's products and services.
10. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All obligations of
Purchaser under this Agreement are subject to, at Purchaser's option, each of
the following conditions at or prior to the Closing, and Seller shall use its
best efforts to cause each condition to be fulfilled:
10.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
10.2 All duties required by this Agreement to be performed by Seller
at or before the Closing shall be performed.
10.3 Since the date of this Agreement there shall be no material
adverse change in the condition of Seller or the Business Assets.
10.4 All documents required to be delivered to Purchaser at or prior
to the Closing shall be delivered.
11. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. All obligations of Seller
at the Closing are subject to, at Seller's option, each of the following
conditions at or prior to the Closing, and Purchaser shall use its best efforts
to cause each condition to be fulfilled:
11.1 All representations of Purchaser contained in this Agreement or
the related documents shall be correct when made and as of the Closing.
<PAGE>
11.2 All duties required by this Agreement to be performed by
Purchaser at or before the Closing shall be performed.
12. INDEMNIFICATION.
12.1 Seller shall indemnify and agrees to hold Purchaser harmless
from:
12.1.1 any loss suffered by Purchaser because a representation
was not true, a warranty was breached or a duty was not performed by Seller
contained in this Agreement or a related document;
12.1.2 any loss suffered by Purchaser in connection with any of
Seller's liabilities which are not assumed by Purchaser under the Liabilities
Undertaking;
12.1.3 any liabilities or debts of Seller, which exist as of the
Closing Date or which arise after that date but which are based upon any
transaction, state of facts or other condition which occurred on or before the
Closing, except to the extent reflected on the schedules attached to this
Agreement;
12.1.4 any liabilities or debts of Seller, which exist as of the
Closing Date or which arise after that date but which are based upon any
transaction, state of facts or other condition which occurred on or before the
Closing Date, except to the extent (i) reflected on the schedules attached to
this Agreement or incurred in connection with a purchase in the ordinary course
of Seller's business and in conformity with the representations contained in
this Agreement, and (ii) assumed by Purchaser under the terms of the Liabilities
Undertaking; and
12.1.5 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the same
or for enforcing this indemnity.
12.2 Purchaser hereby agrees to indemnify and hold Seller harmless
from:
12.2.1 any loss suffered by Seller because a representation was
not true, a warranty was breached or a duty was not performed by Purchaser
contained in this Agreement or a related document;
12.2.2 any liabilities or debts of Seller assumed by Purchaser
under this Agreement or the Liabilities Undertaking; and
12.2.3 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the same
or for enforcing this indemnity.
13. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement shall survive the
Closing.
<PAGE>
14. NOTICES. Any notices described under this Agreement shall be in writing
and shall be deemed given when personally delivered or mailed by first class
registered mail, return receipt requested, addressed to the parties at the
addresses set forth above.
15. ARBITRATION. Any action, dispute, controversy or claim between or among
the Parties, whether sounding in contract, tort, or otherwise ("Dispute") shall,
at the request of any Party, be finally resolved by arbitration as set forth and
provided for within Paragraph 10 of the Restated Global Agreement, as amended.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
ALL FOURS DISTRIBUTING, INC.,
a Colorado corporation,
By:
-------------------------------------------
Lloyd E. Peterman
By:
-------------------------------------------
Mitchell J. Martin
STATE OF COLORADO )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by Lloyd E. Peterman, President, and Mitchell J. Martin,
Vice President of ALL FOURS DISTRIBUTING, INC., a Colorado corporation, general
partner of MPI OF ____________, an ___________________ general partnership.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
<PAGE>
VENTURI TECHNOLOGIES, INC.,
a Nevada corporation
By:
-------------------------------------------
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by _____________________________________, of VENTURI
TECHNOLOGIES, INC., a Nevada corporation.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
MCNAMARA ENTERPRISES, INC.,
a Georgia Corporation
By:
-------------------------------------------
Larry McNamara, President
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by Larry McNamara, President of McNAMARA ENTERPRISES, INC.,
a Georgia Corporation.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
<PAGE>
EXHIBIT A
MPI OF GEORGIA
(Assets)
<PAGE>
EXHIBIT B
MPI OF GEORGIA
(Promissory Note)
<PAGE>
EXHIBIT C
MPI OF GEORGIA
(Liabilities Undertaking)
<PAGE>
EXHIBIT D
MPI OF GEORGIA
(Bill of Sale and Assignment)
<PAGE>
EXHIBIT E
MPI OF GEORGIA
1. All Real Property in which Seller's interest.
2. All equipment/motor vehicles/personal property (owned or leased)
3. All pertinent Trademarks, Service marks
4. Policies of Insurance
5. Contracts
6. Employment/Consulting Agreements and Contracts
<PAGE>
EXHIBIT F
MPI of Georgia
(Employment Matters)
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF PERCENTAGE INTEREST
OF PARTNERSHIP
(MPI OF SOUTHERN FLORIDA)
THIS AGREEMENT FOR PURCHASE AND SALE OF PERCENTAGE INTEREST OF PARTNERSHIP
is entered into with an effective date as of February 1, 2000, by and between
VENTURI TECHNOLOGIES, INC., a Nevada corporation having its principal office at
763 North 530 East, Orem, Utah 84097 ("Purchaser") and EIKOV ENTERPRISES, INC.,
a Florida Corporation ("Seller").
WHEREAS, Seller is a co-partner, with ALL FOURS DISTRIBUTING, INC., a
Colorado corporation ("All Fours") with respect to that certain general
partnership, organized and existing under Colorado law, commonly known and
referred to as "MPI of Southern Florida" ("Partnership"); and together, All
Fours and Seller collectively comprise one hundred percent (100%) of the
Partnership; and
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser all of the Seller's interest in and to the Partnership in
exchange for cash, a promissory note, assumption by Purchaser of certain
liabilities, and Purchaser's conveyance of an amount of its common stock upon
the terms described in this Agreement and the original Restated Global Agreement
of Purchase and Sale, dated October 16, 1999, as later amended by Amendment No.
1, dated as of January 24, 2000 (hereinafter collectively "Global Agreement").
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
the parties agree as follows:
1. PURCHASE OF PARTNERSHIP INTEREST. Seller shall assign, transfer, convey
and deliver to the Purchaser its total percentage interest in and to the
Partnership which said Partnership owns certain properties, assets, claims,
contracts and businesses of every kind, character and description, whether
tangible or intangible, whether accrued, contingent or otherwise, and wherever
located (each of which is referred to as an "Asset" and cumulatively referred to
as "Business Assets") relating to or comprising the Business; and including,
without limitation, all equipment and machinery; goodwill and all unfilled
customer orders or service requests; all inventories, accounts receivable, cash
on hand and petty cash, prepayments, notes receivable, advances, deposits and
other receivables; all leaseholds, fixtures and leasehold improvements; all
supplies, vehicles, furniture, office furnishings and fixtures; all claims,
rights and benefits under contracts, purchase orders or otherwise; all coverage
under Seller's existing insurance policies (if VTI so elects); all trade names
and service marks and registrations and applications therefor, trademarks,
trademark applications and registrations, copyright applications and
registrations, patents and patent applications and registrations; all trade
secrets, know-how, licenses, processes, formulae, royalties, customer lists and
<PAGE>
files, inventories, discoveries, improvements, proprietary or technical
information, computer hardware and software, data, plans, specifications,
drawings and the like, all memberships; all financial, inventory, marketing,
personnel, and other books and records, product literature and advertising;
governmental permits, approvals and authorization (excluding telephone
exchange); all business records and plans, all licenses, assignments, secrecy
and royalty agreements relating to any proprietary rights or trade secrets; and
(i) all of Seller's interest in and to the Partnership reflected on
the Balance Sheet of the Business Operation as of the Closing Date; and
(ii) all of Seller's interest in and to the Partnership of a nature
not normally reflected on a Balance Sheet in accordance with generally accepted
accounting principles which are used primarily in or are primarily related to
the Business; and
(iii) any interest in the certain Partnership held by other divisions
or affiliates of the Seller set forth on Exhibit A attached to this Agreement,
if any.
The interest described above and as set forth within Exhibit A are referred to
collectively as the "Seller's Percentage Interest of Partnership. For purposes
of this and any companion agreement dealing with Purchaser's acquisition of the
Seller's Partnership Interest, Seller shall be deemed to own an undivided
forty-nine percent (49%) interest and All Fours shall be deemed the owner of the
balance of the Partnership. By virtue of a companion Stock Purchase Agreement of
even date, the shareholders of All Fours are selling their total interests in
and to the corporate stock to Purchaser. It is the intent of the Parties that
said transactions will vest one hundred percent (100%) of the Partnership
Interest of MPI of Southern Florida into Purchaser.
2. PAYMENT FOR SELLER'S INTEREST.
2.1 The payment for the Seller's interest in and to the Partnership
shall be in the monetary equivalent amount of $122,500 comprised of
the following:
2.1.1 CASH AND PROMISSORY NOTE. At the Closing, Purchaser will
pay or deliver to Escrow Agent the following as partial consideration for the
Seller's interest:
(a) $24,500.00 cash at closing;
(b) A promissory note duly executed by Purchaser in the
principal amount of $49,000.00 in the form and pursuant to
the terms of Exhibit B, attached hereto.
<PAGE>
2.1.2 VENTURI STOCK. As additional consideration for the
acquisition of Seller's Interest, Purchaser shall issue to Seller and deliver to
the Escrow Agent 12,250 shares of Purchaser's authorized but unissued $0.001 par
value common stock ("Venturi Shares").
2.1.3 LIABILITIES UNDERTAKING. At the Closing, Purchaser shall
also execute a "Liabilities Undertaking" in the form of the attached Exhibit
"C", pursuant to which Purchaser agrees to pay or discharge the obligations
specifically set forth therein.
3. CLOSING. The consummation of the purchase and sale of the Business
Assets as provided for in this Agreement will take place by the execution of
documents in Boulder, Colorado by the appropriate and designated signatories
("Closing").
4. SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.
4.1 At the Closing, Seller shall arrange for delivery to the Escrow
Agent:
4.1.1 a Bill of Sale and Assignment signed by Seller in the form
attached as Exhibit "D";
4.1.2 any other instruments of assignment and transfer necessary
to vest in Purchaser good and marketable title to Seller's Partnership Interest;
4.1.3 all contracts and records relating to Seller's Partnership
Interest;
4.1.4 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and Seller
must sign and/or deliver any documents necessary to transfer and assign to
Purchaser, and confirm Purchaser's title to Seller's Partnership Interest, and
to assist Purchaser in the exercise of all rights thereto. After the Closing,
Seller shall have access to the books and records pertaining to its pre-closing
operations.
4.3 Purchaser shall have the right to collect any receivables that may
be transferred to Purchaser under this Agreement as of the Closing date and to
endorse Seller's name on checks received for such receivables. Seller shall
transfer to Purchaser any cash or other property Seller receives for such
receivables.
4.4 The Parties agree that with each disbursement or release from
Escrow that all payments on the Note may be made directly to the Seller. VTI
further agrees to forward a photocopy of all checks or wire transfer debits made
to the Escrow Agent.
<PAGE>
5. REPRESENTATIONS AND WARRANTIES BY SELLER. To the best of its knowledge
and belief, Seller represents and warrants to Purchaser as follows:
5.1 ORGANIZATION, STANDING AND QUALIFICATION. MPI of Southern Florida
is a general partnership duly organized, validly existing and in good standing
under the laws of the State of Colorado. All Fours is the holder of a 51%
partnership interest therein, and Seller, a Florida corporation, is the holder
of a 49% partnership interest therein. Seller has all requisite power and
authority and is entitled to carry on its business as now being conducted and to
own, lease or operate its properties as and in the places where such business is
now conducted.
5.2 EXECUTION AND PERFORMANCE OF AGREEMENT; AUTHORITY. The performance
of this Agreement by Seller will not result in a default or breach of any other
agreement to which Seller or All Fours is a party. Seller, All Fours and their
respective signatures have the authority to enter into and consummate this
transaction.
5.3 FINANCIAL STATEMENTS. The copies of the following financial
statements given to Purchaser and prepared by Seller's representatives (called
the "Financial Statements") are complete and correct, have been prepared from
the records of MPI of Southern Florida in accordance with generally accepted
accounting principles.
5.3.1 unaudited balance sheet of MPI of Southern Florida (the
"Balance Sheet") as of January 31, 2000 (the "Balance Sheet Date"); MPI of
Southern Florida's unaudited income statement for the Period 12/26/00 to
1/31/00. Also attached as Exhibit G is unaudited Balance Sheet for the period
12/26/99 to 1/31/00.
Such statements of earnings do not contain any items of special income or any
other income not earned in the ordinary course of business except as specified
therein, and such interim financial statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
5.4 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in Exhibit
D or on the Balance Sheet, as of the Balance Sheet Date MPI of Southern Florida
had no debts or obligations of any nature whatsoever, including any tax
liabilities incurred in respect of its income, or its period prior to the close
of business on the Balance Sheet Date or any other debts or obligations relating
to any act, omission or other condition which occurred or existed on or before
the Balance Sheet Date.
5.5 TAXES. All taxes and assessments imposed by any taxing authority,
whether federal, state, local, foreign or otherwise which are due or payable by
Seller and/or MPI of Southern Florida, and all interest and penalties thereon,
have been paid in full (except Use tax returns). All tax returns required to be
filed have been accurately prepared and filed and all deposits required to be
made by Seller and or MPI of Southern Florida with respect to employees'
withholding taxes have been made. Seller and Purchaser agree that Seller is
responsible for taxes only on the income of the Partnership through January 31,
2000. Accordingly, Purchaser agrees to terminate the Partnership pursuant to IRC
ss.708(b)(1) upon the consummation of this transaction
<PAGE>
and in conjunction with the closing of the Stock Purchase Agreement for All
Fours effective as of the commencement of business on February 1, 2000. The
accounting firm of Kreisman, Wolach and Williams, P.C. will prepare the
Partnership return through January 31, 2000. Seller and Purchaser agree to use
the book value of the inventory for the Partnership in conformity with the
Financial Statements as the fair market value of such inventory and to use the
amounts determined by the Seller as the fair market value of the fixed assets of
the Partnership as of January 31, 2000 for all tax purposes. Seller and All
Fours agree to make an election under IRC Section 754 on the January 31, 2000
Partnership return if so requested by Buyer on or before May 1, 2000.
5.6 ABSENCE OF CHANGES OR EVENTS. Between the Balance Sheet Date and
the Closing Date, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of the
Partnership, and no event has occurred or circumstance exists that may result in
such a material adverse change.
5.7 LITIGATION. To the best of its knowledge, there is no claim,
order, investigation or other proceeding against Seller and/or MPI of Southern
Florida, its employees, its properties, or business or the transactions
contemplated by this Agreement, and Seller knows of no basis for the same.
5.8 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the best of
Seller's knowledge MPI of Southern Florida has complied with all laws applicable
to its business and the ownership and use of Business Assets as well as the
conduct of its business will not conflict with the rights of any other person or
entity, and will not cause a default under any agreement to which Seller and/or
MPI of Southern Florida is a party. Seller is not aware of any proposed laws,
condemnations or other proceedings which would adversely affect the Partnership
or its business undertakings.
5.9 TITLE TO PROPERTIES. Seller has a valued percentage interest in
and to Partnership. Neither the Partnership Interest nor the Business Assets are
subject to any lien, lease, license, or adverse claim except (i) as expressly
set forth in the schedules attached to this Agreement, or (ii) insubstantial
imperfections of title which have arisen in the ordinary course of business. To
the best of Seller's knowledge, except as set forth in the schedules attached to
this Agreement, the Business Assets are in good operating condition and repair,
are suitable for the purposes used, and are adequate for all current operations.
5.10 ENVIRONMENTAL COMPLIANCE. To the best of Seller's and MPI of
Southern Florida's knowledge: (a) the Partnership is being operated in
compliance with all environmental laws and with all terms of required permits
and licenses, (b) Seller is not aware of any circumstances that may interfere
with its compliance with environmental laws or which may give rise to any
liability, or which would otherwise form the basis of any claim or
investigation, and that is based on Seller's manufacture, storage, disposal,
transport, or handling, or the release into the environment, of any hazardous
substance, (c) Seller is unaware of any claim, investigation, or proceeding
<PAGE>
pending or threatened against Seller and/or the Partnership, in connection with
the Business Assets or its business relating to environmental laws, and (d)
Seller currently maintains all material government permits, licenses and
agreements required to operate the Partnership and its business, and has
complied with all requirements relating thereto.
5.11 SCHEDULES. Exhibit E contains a complete list and description of:
5.11.1 All real property in which the Partnership has any
ownership or other interest and which is used in connection with the operation
of its business.
5.11.2 All equipment, motor vehicles, and other personal property
(other than inventory and supplies), owned or leased by the Partnership setting
forth a summary description of all leases, claims, and conditions relating
thereto.
5.11.3 All patents, trademarks, service marks, service names,
trade names, and copyrights together with any registrations, applications and
licenses related thereto, owned by Seller and/or MPI of Southern Florida, or
used in the Business Operation.
5.11.4 All insurance policies insuring Seller or MPI of Southern
Florida or its assets, specifying the name of the insurer, the risk insured
against, the limits of coverage, the deductible amount, the premium rate and the
date through which coverage will continue by virtue of premiums already paid.
5.11.5 All contracts or agreements relating to the Partnership or
Business Assets to which the Partnership is a party.
5.11.6 All employment and consulting agreements, compensation
plans, pension plans or retirement plans, group life, health and accident
insurance and other employee benefit plans, including holiday, vacation,
Christmas and other bonus practices, to which the Partnership is a party.
To the best of Seller's knowledge, all of the agreements, leases and licenses
required to be listed on Exhibit E (other than those which have been fully
performed) are valid and binding. Except as disclosed in Exhibit E, no payment
required to be made under any such agreement, lease or license has been prepaid
more than 30 days prior to its due date, and there is not any default, or event
which would constitute a default, and none of such agreements, leases or
licenses is unduly burdensome or adverse to the Partnership's Assets or business
or likely to result in any material loss or liability. None of the Partnership's
existing or completed contracts is subject to renegotiation with any government
body.
5.12 NO GUARANTIES. No obligation of MPI of Southern Florida is
guaranteed by any other person or entity, nor has the Partnership guaranteed any
obligation of any other person or entity.
<PAGE>
5.13 RECEIVABLES. All of the prior receivables have arisen only from
transactions in the ordinary course of business and are customarily collectible
within 90 days after each receivable arose, without offset or resort to
litigation.
5.14 RECORDS. The accounting books of the Partnership are complete and
correct, and to the best of Seller's knowledge, no transactions which are
required to be recorded therein have been omitted.
5.15 DISCLOSURE. All of Seller's representations made in this
Agreement and its related documents are true and contain no untrue statements
and do not omit important facts. Seller has disclosed to Purchaser in writing
all the adverse facts concerning the Business Assets, the Partnership and its
business operation.
5.16 NO CONFLICT. To the best of Seller's knowledge, performance of
this Agreement by Seller will not conflict with any regulations or agreements to
which the Partnership is a party. No authorization or filing, which has not
already been completed, is necessary for the Partnership to perform this
Agreement.
6. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller as follows:
6.1 ORGANIZATION. Purchaser is a corporation organized and in good
standing under the laws of the State of Nevada and has full authority to enter
into this Agreement and to carry on its business and to own and operate its
properties.
6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. All actions required to
be taken by Purchaser relating to the signing of this Agreement shall have been
taken at or prior to the Closing.
6.3 EXECUTION AND PERFORMANCE OF AGREEMENT. The performance of this
Agreement by Purchaser will not result in a default of any other agreement to
which Purchaser is a party. Purchaser has the authority to enter into this
Agreement.
6.4 LITIGATION. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. CONDUCT OF BUSINESS PRIOR TO CLOSING.
7.1 Prior to the Closing, the Partnership shall be conducted in a
manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of the Partnership intact, (ii) to keep available the
services of the Partnership's present
<PAGE>
employees, agents and independent contractors, (iii) to preserve the goodwill of
the Partnership's suppliers, customers, landlords and others having business
relations with it, and (iv) to cooperate with Purchaser and assist in obtaining
the consent of any party to any lease or contract with the Partnership where the
consent of such party may be required by reason of this Agreement.
7.2 If there is a change in any information contained in this
Agreement or its related documents prior to closing, Seller shall give Purchaser
prompt written notice.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) canceling agreements to which the Partnership is a
party, including purchase orders and commitments for capital expenditures or
improvements, (ii) discontinuing particular items or operations and (iii)
purchasing, pricing or selling policy (including offering services at
discounts); provided, however, that nothing contained in this Section shall
require Seller to take action that is likely to result in a penalty or claim for
damages against the Partnership, or in losses to the Partnership, or to
interfere with the conduct of the Partnership's business consistent with prior
practice, or to result in a breach by Seller or the Partnership of any of its
representations contained in this Agreement (unless the breach is waived by
Purchaser).
8. ACCESS TO INFORMATION AND DOCUMENTS. Upon Purchaser's request, Seller
shall give Purchaser access to the Partnership's personnel and all its
properties, documents and records and shall furnish copies of documents
requested by Purchaser. Purchaser shall not improperly disclose the same prior
to the Closing.
9. EMPLOYMENT MATTERS.
9.1 Purchaser shall offer employment to those current employees of the
Partnership that are listed on Exhibit F attached hereto, at the compensation
listed therein.
9.2 Within a reasonable period following the Closing Date Purchaser
shall provide training and support to the Partnership's employees to enable them
to use and sell Purchaser's products and services.
10. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All obligations of
Purchaser under this Agreement are subject to, at Purchaser's option, each of
the following conditions at or prior to the Closing, and Seller shall use its
best efforts to cause each condition to be fulfilled:
10.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
10.2 All duties required by this Agreement to be performed by Seller
at
<PAGE>
or before the Closing shall be performed.
10.3 Since the date of this Agreement there shall be no material
adverse change in the condition of the Partnership or the Business Assets.
10.4 All documents required to be delivered to Purchaser at or prior
to the Closing shall be delivered.
11. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. All obligations of Seller
at the Closing are subject to, at Seller's option, each of the following
conditions at or prior to the Closing, and Purchaser shall use its best efforts
to cause each condition to be fulfilled:
11.1 All representations of Purchaser contained in this Agreement or
the related documents shall be correct when made and as of the Closing.
11.2 All duties required by this Agreement to be performed by
Purchaser at or before the Closing shall be performed.
12. INDEMNIFICATION.
12.1 Seller shall indemnify and agrees to hold Purchaser harmless
from:
12.1.1 any loss suffered by Purchaser because a representation
was not true, a warranty was breached or a duty was not performed by Seller
contained in this Agreement or a related document;
12.1.2 any loss suffered by Purchaser in connection with any of
the Partnership's liabilities which are not assumed by Purchaser under the
Liabilities Undertaking;
12.1.3 any liabilities or debts of the Partnership, which exist
as of the Closing Date or which arise after that date but which are based upon
any transaction, state of facts or other condition which occurred on or before
the Closing, except to the extent reflected on the schedules attached to this
Agreement;
12.1.4 any liabilities or debts of the Partnership, which exist
as of the Closing Date or which arise after that date but which are based upon
any transaction, state of facts or other condition which occurred on or before
the Closing Date, except to the extent (i) reflected on the schedules attached
to this Agreement or incurred in connection with a purchase in the ordinary
course of the Partnership's business and in conformity with the representations
contained in this Agreement, and (ii) assumed by Purchaser under the terms of
the Liabilities Undertaking; and
12.1.5 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the same
or for
<PAGE>
enforcing this indemnity.
12.2 Purchaser hereby agrees to indemnify and hold Seller harmless
from:
12.2.1 any loss suffered by Seller because a representation was
not true, a warranty was breached or a duty was not performed by Purchaser
contained in this Agreement or a related document;
12.2.2 any liabilities or debts of the Partnership assumed by
Purchaser under this Agreement or the Liabilities Undertaking; and
12.2.3 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the same
or for enforcing this indemnity.
13. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement shall survive the
Closing.
14. NOTICES. Any notices described under this Agreement shall be in writing
and shall be deemed given when personally delivered or mailed by first class
registered mail, return receipt requested, addressed to the parties at the
addresses set forth above.
15. ARBITRATION. Any action, dispute, controversy or claim between or among
the Parties, whether sounding in contract, tort, or otherwise ("Dispute") shall,
at the request of any Party, be finally resolved by arbitration as set forth and
provided for within Paragraph 10 of the Restated Global Agreement, as amended.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
ALL FOURS DISTRIBUTING, INC.,
a Colorado corporation,
By:
-------------------------------------------
Lloyd E. Peterman
By:
-------------------------------------------
Mitchell J. Martin
STATE OF COLORADO )
) ss.
<PAGE>
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by Lloyd E. Peterman, President, and Mitchell J. Martin,
Vice President of ALL FOURS DISTRIBUTING, INC., a Colorado corporation, general
partner of MPI OF ____________, an ___________________ general partnership.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
<PAGE>
VENTURI TECHNOLOGIES, INC.,
a Nevada corporation
By:
-------------------------------------------
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by _____________________________________, of VENTURI
TECHNOLOGIES, INC., a Nevada corporation.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
EIKOV ENTERPRISES, INC.,
a Florida Corporation
By:
-------------------------------------------
Matt Eikov, President
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by Matt Eikov, President of EIKOV ENTERPRISES, INC, a
Florida corporation.
Witness my hand and official seal.
My commission expires: ___________________________.
<PAGE>
------------------------------------------
Notary Public
<PAGE>
EXHIBIT A
MPI OF SOUTHERN FLORIDA
(Assets)
<PAGE>
EXHIBIT B
MPI OF SOUTHERN FLORIDA
(Promissory Note)
<PAGE>
EXHIBIT C
MPI OF SOUTHERN FLORIDA
(Liabilities Undertaking)
<PAGE>
EXHIBIT D
MPI OF SOUTHERN FLORIDA
(Bill of Sale and Assignment)
<PAGE>
EXHIBIT E
MPI OF SOUTHERN FLORIDA
1. All Real Property in which Seller's interest.
2. All equipment/motor vehicles/personal property (owned or leased)
3. All pertinent Trademarks, Service marks
4. Policies of Insurance
5. Contracts
6. Employment/Consulting Agreements and Contracts
<PAGE>
EXHIBIT F
MPI of Southern Florida
(Employment Matters)
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF PERCENTAGE INTEREST
OF PARTNERSHIP
(MPI OF WASHINGTON)
THIS AGREEMENT FOR PURCHASE AND SALE OF PERCENTAGE INTEREST OF PARTNERSHIP
is entered into with an effective date as of February 1, 2000, by and between
VENTURI TECHNOLOGIES, INC., a Nevada corporation having its principal office at
763 North 530 East, Orem, Utah 84097 ("Purchaser") and DELABARRE ENTERPRISES,
INC., a Washington Corporation ("Seller").
WHEREAS, Seller is a co-partner, with ALL FOURS DISTRIBUTING, INC., a
Colorado corporation ("All Fours") with respect to that certain general
partnership, organized and existing under Washington law, commonly known and
referred to as "MPI of Washington" ("Partnership"); and together, All Fours and
Seller collectively comprise one hundred percent (100%) of the Partnership; and
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser all of the Seller's interest in and to the Partnership in
exchange for cash, a promissory note, assumption by Purchaser of certain
liabilities, and Purchaser's conveyance of an amount of its common stock upon
the terms described in this Agreement and the original Restated Global Agreement
of Purchase and Sale, dated October 16, 1999, as later amended by Amendment No.
1, dated as of January 24, 2000 (hereinafter collectively "Global Agreement").
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
the parties agree as follows:
1. PURCHASE OF PARTNERSHIP INTEREST. Seller shall assign, transfer, convey
and deliver to the Purchaser its total percentage interest in and to the
Partnership which said Partnership owns certain properties, assets, claims,
contracts and businesses of every kind, character and description, whether
tangible or intangible, whether accrued, contingent or otherwise, and wherever
located (each of which is referred to as an "Asset" and cumulatively referred to
as "Business Assets") relating to or comprising the Business; and including,
without limitation, all equipment and machinery; goodwill and all unfilled
customer orders or service requests; all inventories, accounts receivable, cash
on hand and petty cash, prepayments, notes receivable, advances, deposits and
other receivables; all leaseholds, fixtures and leasehold improvements; all
supplies, vehicles, furniture, office furnishings and fixtures; all claims,
rights and benefits under contracts, purchase orders or otherwise; all coverage
under Seller's existing insurance policies (if VTI so elects); all trade names
and service marks and registrations and applications therefor, trademarks,
trademark applications and registrations, copyright applications and
registrations, patents and patent applications and registrations; all trade
secrets, know-how, licenses, processes, formulae, royalties, customer lists and
<PAGE>
files, inventories, discoveries, improvements, proprietary or technical
information, computer hardware and software, data, plans, specifications,
drawings and the like, all memberships; all financial, inventory, marketing,
personnel, and other books and records, product literature and advertising;
governmental permits, approvals and authorization (excluding telephone
exchange); all business records and plans, all licenses, assignments, secrecy
and royalty agreements relating to any proprietary rights or trade secrets; and
(i) all of Seller's interest in and to the Partnership reflected on
the Balance Sheet of the Business Operation as of the Closing Date; and
(ii) all of Seller's interest in and to the Partnership of a nature
not normally reflected on a Balance Sheet in accordance with generally accepted
accounting principles which are used primarily in or are primarily related to
the Business; and
(iii) any interest in the certain Partnership held by other divisions
or affiliates of the Seller set forth on Exhibit A attached to this Agreement,
if any.
The interest described above and as set forth within Exhibit A are referred to
collectively as the "Seller's Percentage Interest of Partnership. For purposes
of this and any companion agreement dealing with Purchaser's acquisition of the
Seller's Partnership Interest, Seller shall be deemed to own an undivided
forty-nine percent (49%) interest and All Fours shall be deemed the owner of the
balance of the Partnership. By virtue of a companion Stock Purchase Agreement of
even date, the shareholders of All Fours are selling their total interests in
and to the corporate stock to Purchaser. It is the intent of the Parties that
said transactions will vest one hundred percent (100%) of the Partnership
Interest of MPI of Washington into Purchaser.
2. PAYMENT FOR SELLER'S INTEREST.
2.1 The payment for the Seller's interest in and to the Partnership
shall be in the monetary equivalent amount of $245,000 comprised of
the following:
2.1.1 CASH AND PROMISSORY NOTE. At the Closing, Purchaser will
pay or deliver to Escrow Agent the following as partial consideration for the
Seller's interest:
(a) $49,000.00 cash at closing;
(b) A promissory note duly executed by Purchaser in the
principal amount of $98,000.00 in the form and pursuant to
the terms of Exhibit B, attached hereto.
2.1.2 VENTURI STOCK. As additional consideration for the
acquisition
<PAGE>
of Seller's Interest, Purchaser shall issue to Seller and deliver to the Escrow
Agent 24,500 shares of Purchaser's authorized but unissued $0.001 par value
common stock ("Venturi Shares").
2.1.3 LIABILITIES UNDERTAKING. At the Closing, Purchaser shall
also execute a "Liabilities Undertaking" in the form of the attached Exhibit
"C", pursuant to which Purchaser agrees to pay or discharge the obligations
specifically set forth therein.
3. CLOSING. The consummation of the purchase and sale of the Business
Assets as provided for in this Agreement will take place by the execution of
documents in Boulder, Colorado by the appropriate and designated signatories
("Closing").
4. SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.
4.1 At the Closing, Seller shall arrange for delivery to the Escrow
Agent:
4.1.1 a Bill of Sale and Assignment signed by Seller in the form
attached as Exhibit "D";
4.1.2 any other instruments of assignment and transfer necessary
to vest in Purchaser good and marketable title to Seller's Partnership Interest;
4.1.3 all contracts and records relating to Seller's Partnership
Interest;
4.1.4 all documents required by this Agreement.
4.2 At any time after the Closing, Purchaser may request and Seller
must sign and/or deliver any documents necessary to transfer and assign to
Purchaser, and confirm Purchaser's title to Seller's Partnership Interest, and
to assist Purchaser in the exercise of all rights thereto. After the Closing,
Seller shall have access to the books and records pertaining to its pre-closing
operations.
4.3 Purchaser shall have the right to collect any receivables that may
be transferred to Purchaser under this Agreement as of the Closing date and to
endorse Seller's name on checks received for such receivables. Seller shall
transfer to Purchaser any cash or other property Seller receives for such
receivables.
4.4 The Parties agree that with each disbursement or release from
Escrow that all payments on the Note may be made directly to the Seller. VTI
further agrees to forward a photocopy of all checks or wire transfer debits made
to the Escrow Agent.
5. REPRESENTATIONS AND WARRANTIES BY SELLER. To the best of its knowledge
and belief, Seller represents and warrants to Purchaser as follows:
<PAGE>
5.1 ORGANIZATION, STANDING AND QUALIFICATION. MPI of Washington is a
general partnership duly organized, validly existing and in good standing under
the laws of the State of Washington. All Fours is the holder of a 51%
partnership interest therein, and Seller, a Washington corporation, is the
holder of a 49% partnership interest therein. Seller has all requisite power and
authority and is entitled to carry on its business as now being conducted and to
own, lease or operate its properties as and in the places where such business is
now conducted.
5.2 EXECUTION AND PERFORMANCE OF AGREEMENT; AUTHORITY. The performance
of this Agreement by Seller will not result in a default or breach of any other
agreement to which Seller or All Fours is a party. Seller, All Fours and their
respective signatures have the authority to enter into and consummate this
transaction.
5.3 FINANCIAL STATEMENTS. The copies of the following financial
statements given to Purchaser and prepared by Seller's representatives (called
the "Financial Statements") are complete and correct, have been prepared from
the records of MPI of Washington in accordance with generally accepted
accounting principles.
5.3.1 unaudited balance sheet of MPI of Washington (the "Balance
Sheet") as of January 31, 2000 (the "Balance Sheet Date"); MPI of Washington'
unaudited income or cash flow statement for the period 12/26/00 to 1/31/00. Also
attached as Exhibit G is unaudited Balance Sheet for the period 12/26/99 to
1/31/00.
Such statements of earnings do not contain any items of special income or any
other income not earned in the ordinary course of business except as specified
therein, and such interim financial statements include all adjustments, which
consist only of normal recurring accruals, necessary for such fair presentation.
5.4 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in Exhibit
D or on the Balance Sheet, as of the Balance Sheet Date MPI of Washington had no
debts or obligations of any nature whatsoever, including any tax liabilities
incurred in respect of its income, or its period prior to the close of business
on the Balance Sheet Date or any other debts or obligations relating to any act,
omission or other condition which occurred or existed on or before the Balance
Sheet Date.
5.5 TAXES. All taxes and assessments imposed by any taxing
authority, whether federal, state, local, foreign or otherwise which are due
or payable by Seller and/or MPI of Washington, and all interest and penalties
thereon, have been paid in full (except Use tax returns). All tax returns
required to be filed have been accurately prepared and filed and all deposits
required to be made by Seller and or MPI of Washington with respect to
employees' withholding taxes have been made. Seller and Purchaser agree that
Seller is responsible for taxes only on the income of the Partnership through
January 31, 2000. Accordingly, Purchaser agrees to terminate the Partnership
pursuant to IRC Section 708(b)(1) upon the consummation of this transaction
and in conjunction with the closing of the Stock Purchase Agreement for All
Fours effective as of the commencement of business on February 1, 2000. The
accounting firm of Kreisman, Wolach and Williams, P.C. will prepare the
Partnership return through January 31, 2000. Seller and Purchaser agree to
use the book value of the inventory
<PAGE>
for the Partnership in conformity with the Financial Statements as the fair
market value of such inventory and to use the amounts determined by the
Seller as the fair market value of the fixed assets of the Partnership as of
January 31, 2000 for all tax purposes. Seller and All Fours agree to make an
election under IRC Section 754 on the January 31, 2000 Partnership return if
so requested by Buyer on or before May 1, 2000.
5.6 ABSENCE OF CHANGES OR EVENTS. Between the Balance Sheet Date and
the Closing Date, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of the
Partnership, and no event has occurred or circumstance exists that may result in
such a material adverse change.
5.7 LITIGATION. To the best of its knowledge, there is no claim,
order, investigation or other proceeding against Seller and/or MPI of
Washington, its employees, its properties, or business or the transactions
contemplated by this Agreement, and Seller knows of no basis for the same.
5.8 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the best of
Seller's knowledge MPI of Washington has complied with all laws applicable to
its business and the ownership and use of Business Assets as well as the conduct
of its business will not conflict with the rights of any other person or entity,
and will not cause a default under any agreement to which Seller and/or MPI of
Washington is a party. Seller is not aware of any proposed laws, condemnations
or other proceedings which would adversely effect the Partnership or its
business undertakings.
5.9 TITLE TO PROPERTIES. Seller has a valued percentage interest in
and to Partnership. Neither the Partnership Interest nor the Business Assets are
subject to any lien, lease, license, or adverse claim except (i) as expressly
set forth in the schedules attached to this Agreement, or (ii) insubstantial
imperfections of title which have arisen in the ordinary course of business. To
the best of Seller's knowledge, except as set forth in the schedules attached to
this Agreement, the Business Assets are in good operating condition and repair,
are suitable for the purposes used, and are adequate for all current operations.
5.10 ENVIRONMENTAL COMPLIANCE. To the best of Seller's and MPI of
Washington's knowledge: (a) the Partnership is being operated in compliance with
all environmental laws and with all terms of required permits and licenses, (b)
Seller is not aware of any circumstances that may interfere with its compliance
with environmental laws or which may give rise to any liability, or which would
otherwise form the basis of any claim or investigation, and that is based on
Seller's manufacture, storage, disposal, transport, or handling, or the release
into the environment, of any hazardous substance, (c) Seller is unaware of any
claim, investigation, or proceeding pending or threatened against Seller and/or
MPI of Colorado, in connection with the Business Assets or its business relating
to environmental laws, and (d) Seller currently maintains all material
government permits, licenses and agreements required to operate the Partnership
and its business, and has complied with all requirements relating thereto.
5.11 SCHEDULES. Exhibit E contains a complete list and description of:
<PAGE>
5.11.1 All real property in which Seller has any ownership or
other interest and which is used in connection with the operation of its
business.
5.11.2 All equipment, motor vehicles, and other personal property
(other than inventory and supplies), owned or leased by Seller setting forth a
summary description of all leases, claims, and conditions relating thereto.
5.11.3 All patents, trademarks, service marks, service names,
trade names, and copyrights together with any registrations, applications and
licenses related thereto, owned by Seller and/or MPI of Washington, or used in
the Business Operation.
5.11.4 All insurance policies insuring Seller or MPI of
Washington or its assets, specifying the name of the insurer, the risk insured
against, the limits of coverage, the deductible amount, the premium rate and the
date through which coverage will continue by virtue of premiums already paid.
5.11.5 All contracts or agreements relating to the Partnership or
Business Assets to which Seller is a party.
5.11.6 All employment and consulting agreements, compensation
plans, pension plans or retirement plans, group life, health and accident
insurance and other employee benefit plans, including holiday, vacation,
Christmas and other bonus practices, to which Seller is a party.
To the best of Seller's knowledge, all of the agreements, leases and licenses
required to be listed on Exhibit E (other than those which have been fully
performed) are valid and binding. Except as disclosed in Exhibit E, no payment
required to be made under any such agreement, lease or license has been prepaid
more than 30 days prior to its due date, and there is not any default, or event
which would constitute a default, and none of such agreements, leases or
licenses is unduly burdensome or adverse to Seller's Assets or business or
likely to result in any material loss or liability. None of Seller's existing or
completed contracts is subject to renegotiation with any government body.
5.12 NO GUARANTIES. No obligation of MPI of Washington is guaranteed
by any other person or entity, nor has Seller guaranteed any obligation of any
other person or entity.
5.13 RECEIVABLES. All of the prior receivables have arisen only from
transactions in the ordinary course of business and are customarily collectible
within 90 days after each receivable arose, without offset or resort to
litigation.
5.14 RECORDS. The accounting books of the Partnership are complete and
correct, and to the best of Seller's knowledge, no transactions which are
required to be recorded therein have been omitted.
5.15 DISCLOSURE. All of Seller's representations made in this
Agreement and its related documents are true and contain no untrue statements
and do not omit
<PAGE>
important facts. Seller has disclosed to Purchaser in writing all the adverse
facts concerning the Business Assets, the Partnership and its business
operation.
5.16 NO CONFLICT. To the best of Seller's knowledge, performance of
this Agreement by Seller will not conflict with any regulations or agreements to
which Seller is a party. No authorization or filing, which has not already been
completed, is necessary for Seller to perform this Agreement.
6. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller as follows:
6.1 ORGANIZATION. Purchaser is a corporation organized and in good
standing under the laws of the State of Nevada and has full authority to enter
into this Agreement and to carry on its business and to own and operate its
properties.
6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. All actions required to
be taken by Purchaser relating to the signing of this Agreement shall have been
taken at or prior to the Closing.
6.3 EXECUTION AND PERFORMANCE OF AGREEMENT. The performance of this
Agreement by Purchaser will not result in a default of any other agreement to
which Purchaser is a party. Purchaser has the authority to enter into this
Agreement.
6.4 LITIGATION. There is no claim, order, investigation or other
proceeding, against Purchaser relating to the transactions contemplated by this
Agreement and Purchaser does not know or have any reason to be aware of any
basis for the same.
7. CONDUCT OF BUSINESS PRIOR TO CLOSING.
7.1 Prior to the Closing, the Partnership shall be conducted in a
manner consistent with its prior practice and shall preserve its assets and
properties in good condition and maintain insurance thereon in accordance with
present practices, and Seller will use its best efforts (i) to preserve the
business and organization of Seller intact, (ii) to keep available the services
of Seller's present employees, agents and independent contractors, (iii) to
preserve the goodwill of Seller's suppliers, customers, landlords and others
having business relations with it, and (iv) to cooperate with Purchaser and
assist in obtaining the consent of any party to any lease or contract with
Seller where the consent of such party may be required by reason of this
Agreement.
7.2 If there is a change in any information contained in this
Agreement or its related documents prior to closing, Seller shall give Purchaser
prompt written notice.
7.3 Seller shall consult with and follow the recommendations of
Purchaser with respect to (i) canceling agreements to which Seller is a party,
including purchase orders and commitments for capital expenditures or
improvements, (ii) discontinuing particular items or operations and (iii)
purchasing, pricing or selling policy (including offering services at
discounts); provided, however, that nothing contained in
<PAGE>
this Section shall require Seller to take action that is likely to result in a
penalty or claim for damages against Seller, or in losses to Seller, or to
interfere with the conduct of Seller's business consistent with prior practice,
or to result in a breach by Seller of any of its representations contained in
this Agreement (unless the breach is waived by Purchaser).
8. ACCESS TO INFORMATION AND DOCUMENTS. Upon Purchaser's request, Seller
shall give Purchaser access to Seller's personnel and all its properties,
documents and records and shall furnish copies of documents requested by
Purchaser. Purchaser shall not improperly disclose the same prior to the
Closing.
9. EMPLOYMENT MATTERS.
9.1 Purchaser shall offer employment to those current employees of
Seller that are listed on Exhibit F attached hereto, at the compensation listed
therein.
9.2 Within a reasonable period following the Closing Date Purchaser
shall provide training and support to Seller's employees to enable them to use
and sell Purchaser's products and services.
10. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. All obligations of
Purchaser under this Agreement are subject to, at Purchaser's option, each of
the following conditions at or prior to the Closing, and Seller shall use its
best efforts to cause each condition to be fulfilled:
10.1 All representations of Seller in this Agreement or the related
documents shall be correct when made and shall be deemed to have been made again
as of the Closing Date, and shall then be correct except for changes allowed
under the terms of this Agreement.
10.2 All duties required by this Agreement to be performed by Seller
at or before the Closing shall be performed.
10.3 Since the date of this Agreement there shall be no material
adverse change in the condition of Seller or the Business Assets.
10.4 All documents required to be delivered to Purchaser at or prior
to the Closing shall be delivered.
11. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. All obligations of Seller
at the Closing are subject to, at Seller's option, each of the following
conditions at or prior to the Closing, and Purchaser shall use its best efforts
to cause each condition to be fulfilled:
11.1 All representations of Purchaser contained in this Agreement or
the related documents shall be correct when made and as of the Closing.
11.2 All duties required by this Agreement to be performed by
Purchaser
<PAGE>
at or before the Closing shall be performed.
12. INDEMNIFICATION.
12.1 Seller shall indemnify and agrees to hold Purchaser harmless
from:
12.1.1 any loss suffered by Purchaser because a representation
was not true, a warranty was breached or a duty was not performed by Seller
contained in this Agreement or a related document;
12.1.2 any loss suffered by Purchaser in connection with any of
Seller's liabilities which are not assumed by Purchaser under the Liabilities
Undertaking;
12.1.3 any liabilities or debts of Seller, which exist as of the
Closing Date or which arise after that date but which are based upon any
transaction, state of facts or other condition which occurred on or before the
Closing, except to the extent reflected on the schedules attached to this
Agreement;
12.1.4 any liabilities or debts of Seller, which exist as of the
Closing Date or which arise after that date but which are based upon any
transaction, state of facts or other condition which occurred on or before the
Closing Date, except to the extent (i) reflected on the schedules attached to
this Agreement or incurred in connection with a purchase in the ordinary course
of Seller's business and in conformity with the representations contained in
this Agreement, and (ii) assumed by Purchaser under the terms of the Liabilities
Undertaking; and
12.1.5 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the same
or for enforcing this indemnity.
12.2 Purchaser hereby agrees to indemnify and hold Seller harmless
from:
12.2.1 any loss suffered by Seller because a representation was
not true, a warranty was breached or a duty was not performed by Purchaser
contained in this Agreement or a related document;
12.2.2 any liabilities or debts of Seller assumed by Purchaser
under this Agreement or the Liabilities Undertaking; and
12.2.3 any claims, judgments and expenses, including legal fees,
incurred for any of the foregoing or for attempting to avoid or oppose the same
or for enforcing this indemnity.
13. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement shall survive the
Closing.
<PAGE>
14. NOTICES. Any notices described under this Agreement shall be in writing
and shall be deemed given when personally delivered or mailed by first class
registered mail, return receipt requested, addressed to the parties at the
addresses set forth above.
15. ARBITRATION. Any action, dispute, controversy or claim between or among
the Parties, whether sounding in contract, tort, or otherwise ("Dispute") shall,
at the request of any Party, be finally resolved by arbitration as set forth and
provided for within Paragraph 10 of the Restated Global Agreement, as amended.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
ALL FOURS DISTRIBUTING, INC.,
a Colorado corporation,
By:
-------------------------------------------
Lloyd E. Peterman
By:
-------------------------------------------
Mitchell J. Martin
STATE OF COLORADO )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by Lloyd E. Peterman, President, and Mitchell J. Martin,
Vice President of ALL FOURS DISTRIBUTING, INC., a Colorado corporation, general
partner of MPI OF ____________, an ___________________ general partnership.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
<PAGE>
VENTURI TECHNOLOGIES, INC.,
a Nevada corporation
By:
-------------------------------------------
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by _____________________________________, of VENTURI
TECHNOLOGIES, INC., a Nevada corporation.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
DELABARRE ENTERPRISES, INC.,
a Washington Corporation
By:
-------------------------------------------
________________________, President
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by _______________, President of DELABARRE ENTERPRISES,
INC., a Washington Corporation.
Witness my hand and official seal.
My commission expires: ___________________________.
------------------------------------------
Notary Public
<PAGE>
EXHIBIT A
MPI OF WASHINGTON
(Assets)
<PAGE>
EXHIBIT B
MPI OF WASHINGTON
(Promissory Note)
<PAGE>
EXHIBIT C
MPI OF WASHINGTON
(Liabilities Undertaking)
<PAGE>
EXHIBIT D
MPI OF WASHINGTON
(Bill of Sale and Assignment)
<PAGE>
EXHIBIT E
MPI OF WASHINGTON
1. All Real Property in which Seller's interest.
2. All equipment/motor vehicles/personal property (owned or leased)
3. All pertinent Trademarks, Service marks
4. Policies of Insurance
5. Contracts
6. Employment/Consulting Agreements and Contracts
<PAGE>
EXHIBIT F
MPI of Washington
(Employment Matters)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 242,786
<SECURITIES> 0
<RECEIVABLES> 1,091,883
<ALLOWANCES> 120,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,439,787
<PP&E> 9,353,522
<DEPRECIATION> 2,389,269
<TOTAL-ASSETS> 12,818,687
<CURRENT-LIABILITIES> 4,535,062
<BONDS> 0
0
3,163
<COMMON> 11,267
<OTHER-SE> 2,865,574
<TOTAL-LIABILITY-AND-EQUITY> 12,818,687
<SALES> 9,956,218
<TOTAL-REVENUES> 9,956,218
<CGS> 5,577,693
<TOTAL-COSTS> 16,673,406
<OTHER-EXPENSES> 2,273,354<F2>
<LOSS-PROVISION> 638,759
<INTEREST-EXPENSE> 1,571,602
<INCOME-PRETAX> (8,990,542)
<INCOME-TAX> 465,838<F1>
<INCOME-CONTINUING> (8,524,704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,524,704)
<EPS-BASIC> (.97)
<EPS-DILUTED> (.97)
<FN>
<F1>INCOME TAX BENEFIT
<F2>INCLUDES PROVISION FOR DOUBTFUL ACCOUNTS AND INTEREST EXPENSE
</FN>
</TABLE>
