As filed with the Securities and Exchange Commission on May __, 1999
Registration No. _________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under
THE SECURITIES ACT OF 1933
Americlean, Inc.
(Exact name of registrant as specified in charter)
Delaware 5087 Applied for
(State or other jurisdiction (Primary Standard Classi- (IRS Employer
of incorporation) fication Code Number) I.D. Number)
1177 West Hastings St.
Suite 1910
Vancouver, British Columbia V6E 2K3
604-682-6996
(Address and telephone number
of principal executive offices)
3931 Glenwood Drive
Charlotte, North Carolina 28208
(Address of principle place of business or
intended principle place of business)
Andrew Hromyk
1177 West Hastings St.
Suite 1910
Vancouver, British Columbia V6E 2K3
604-682-6996
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
303-839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
Page 1 of Pages
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit (1) Price
Fee
Common Stock (2) 500,000 $2.50 $1,250,000 347.50
- --------------------------------------------------------------------------------
Common Stock (3) 700,000 $2.50 $1,750,000 486.50
- --------------------------------------------------------------------------------
Total $3,000,000 $834.00
- -----------------------------------------------------------------------
(1) Offering price computed in accordance with Rule 457(c).
(2) Shares of Common Stock issuable upon conversion of Company's Series A
Preferred Stock. Includes additional shares which may be issued due to
potential adjustments to conversion rate.
(3) Shares of Common Stock issuable upon the exercise of warrants and
options granted to a sales agent and to consultants. Includes
additional shares which may be issues due to potential adjustments to
conversion rate.
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for
issuance upon the conversion of the Series A preferred Stock or upon the
exercise of the warrants or options as a result of any adjustment in the
number of securities issuable by reason of the anti-dilution provisions of
the Series A Preferred Stock, the warrants or the options.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of l933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
PROSPECTUS
AMERICLEAN
Common Stock
This Prospectus relates to the sale of shares of the common stock of
Americlean, Inc. which were issued to the holders of Americlean's Series A
Preferred Stock upon the conversion of the Series A Preferred Stock The
Preferred Stock will automatically convert into shares of Americlean's
common stock 30 days after the date of this Prospectus. Assuming a
conversion price of $2.50 per share, Americlean estimates that the holders
of the Preferred Shares will receive 240,000 shares of Americlean's common
stock. The actual number of shares to be issued upon the conversion of the
Series A Preferred Stock will depend upon the price of Americlean's common
stock at the time of conversion. See "Dilution and Comparative Share Data."
This Prospectus also relates to the sale of up to 216,800 shares of
Americlean's common stock issuable upon the exercise of warrants and
options issued to a sales agent and to a consultant to Americlean.
The holders of the Series A Preferred Stock, the warrants and the
options are sometimes referred to in this Prospectus as the selling
shareholders.
Americlean will not receive any proceeds from the resale of the
shares by the selling shareholders. The selling shareholders may resell the
shares they acquire upon the conversion of the preferred shares or the
exercise of the warrants or options from time to time in the public market.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
These securities are speculative and involve a high degree of risk
and should be purchased only by persons who can afford to lose their entire
investment. For a description of certain important factors that should be
considered by prospective investors, see "Risk Factors" beginning on page
_____ of this Prospectus
On May ___, 1999 the closing bid price of Americlean's common stock
on the NASD OTC Bulletin Board was $_____.
The date of this prospectus is May ___, 1999
<PAGE>
PROSPECTUS SUMMARY
The following is a brief summary of the information in this
Prospectus. Potential investors should read the entire Prospectus prior to
making an investment decision.
AMERICLEAN
Americlean sells laundry and dry cleaning supplies and equipment to
customers in North Carolina, South Carolina, Virginia, Tennessee, Georgia,
and Flordia. The supplies include hangers, poly bags, bleaches, solvent
spotters, production control tags, packing and various other items. The
equipment sold by Americlean includes dry cleaning machines, shirt
finishing presses, boilers, and conveyers. Americlean also provides parts,
installations and service to its customers. Americlean has a customer base
of over 2000 dry cleaners, laundries, hospitals, nursing home, and hotels;
none of which accounts for more than 2% of total sales. Americlean employs
over sixty people and operates its own fleet of delivery trucks and service
vans. Americlean's main distribution center is located in Charlotte, North
Carolina, with branches in Jacksonville and St. Petersburg Florida.
Americlean also has offices in Burbank, California and Carmel, Indiana
through which it distributes dry cleaning solvents and provides consulting
services to dry cleaning operators.
At the present time, Americlean does not manufacture any of the
products which it distributes, but rather purchases these products from
approximately 100 vendors.
With the exception of labor, the products distributed by Americlean
represent the largest percentage of an average dry cleaner's operating
expenses.
Americlean's plan of business entails expansion through the acquisition of
additional companies operating in the laundry and dry cleaning supply and
distribution business and to this end has entered into an agreement to
acquire such a business located in Hammond, Indiana, subject to numerous
conditions in favour of Americlean including the preparation of audited
financial statements for the target business and a positive due diligence
review by Americlean of the target business' operations.
All historical share data in this Prospectus has been adjusted to
reflect a 1-for-4 reverse split which was effective in January 1999.
Americlean's executive offices are located at 1177 West Hastings St.,
Suite 1910, Vancouver, British Columbia. Americlean's telephone number is
604-682-6996.
Common Stock
Outstanding: As of April 30,1999 Americlean had 5,423,090 shares of
Common Stock issued and outstanding. The number of
outstanding shares does not give effect to shares which
may be issued upon the conversion of the Series A
Preferred Stock or upon the exercise and/or conversion
of options, warrants or other convertible securities
previously issued by Americlean.
<PAGE>
OTC BULLETIN
BOARD SYMBOL: AMCX
RISK FACTORS
The purchase of the securities offered involves a high degree of
risk and immediate substantial dilution to investors. See "Risk Factors"
for more detailed information concerning the risks associated with an
investment in Americlean's securities.
RISK FACTORS
An investment in Americlean's securities involves substantial risks,
some of which are summarized below. Prospective investors should carefully
consider the following risk factors relating to Americlean and this
Offering prior to making an investment.
Americlean has a limited operating history and has not earned any profits.
Americlean has had only limited revenues since it was formed in March
1997. Since the date of its formation and through December 31, 1998
Americlean incurred net losses of approximately $(1,503,000). Americlean
has relied principally upon the proceeds of private sales of securities to
finance its activities to date. In March 1999 Americlean acquired the
business of Boggs & Company, Inc. and JKG Group, Inc.,collectively referred
to as "Boggs." During the three months ending December 31,1998 Boggs lost
$(105,000) from its operations. There can be no assurance that Americlean
will generate any profits or that the securities offered will have any
value.
Americlean's business involves environmental risks.
Americlean's plan of business involves the supply and distribution of
hazardous chemicals including perc. These chemicals are subject to strict
regulation and persons or entities which allow same to be released into the
environment are generally required to bear the costs of remediation. These
costs can easily exceed Americlean's financial resources rendering
Americlean insolvent. In addition, regulation of hazardous materials is
presently evolving and there can be no guarantee that regulations will not
be imposed in the future which would have a material adverse impact on
Americlean's business and proposed business.
Americlean may be unable to expand its operations.
Americlean's plans call for acquiring distributors of dry cleaning
supplies and building dry cleaning supply plants in the United States.
Americlean also plans to manufacture or otherwise supply a variety of
products to the dry cleaning industry. Americlean's plans in this regard
will require substantial capital. There can be no assurance that Americlean
will be able to obtain the additional capital needed to expand its business
or, even if such capital is obtained, that Americlean's expansion plans
will be successful. In addition, Americlean's expansion plans will be
dependent upon obtaining permits and approvals from various regulatory
authorities which have jurisdiction over the collection, storage, treatment
and disposal of hazardous waste. There can be no assurance that Americlean
will be able to obtain the necessary licenses, permits and/or
authorizations required to expand its business.
<PAGE>
Americlean lacks sufficient capital to comply with an acquisition
agreement.
Americlean has acquired all of the shares of Universal EnviroClean
Systems, Inc. ("Universal") pursuant to the terms of a Share Purchase
Agreement dated April 28, 1999. Under this agreement Americlean has agreed
to invest the sum of $180,000 over a twelve week period into the business
of Universal. At present Americlean does not have access to sufficient
capital to meet this obligation. While Americlean hopes to raise additional
capital in the immediate future, there is no guarantee that it will be able
to do so.
The technology used by Americlean in treating perc waste is not
covered by any patent and competitors may be able to duplicate Americlean's
technology.
There is only a limited market for the securities of Americlean, and
there is no assurance that such a market will continue.
Trades of Americlean's common stock are presently subject to Rule
15g-9 of the Securities and Exchange Commission, which rule imposes certain
requirements on broker/dealers who sell securities subject to the rule to
persons other than established customers and accredited investors. For
transactions covered by the rule, brokers/dealers must make a special
suitability determination for purchasers of the securities and receive the
purchaser's written agreement to the transaction prior to sale. The
Securities and Exchange Commission also has rules that regulate
broker/dealer practices in connection with transactions in "penny stocks".
Penny stocks generally are equity securities with a price of less than
$5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and
volume information with respect to transactions in that security is
provided by the exchange or system). The penny stock rules require a
broker/dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document prepared
by the Commission that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker/dealer also
must provide the customer with current bid and offer quotations for the
penny stock, the compensation of the broker/dealer and its salesperson in
the transaction, and monthly account statements showing the market value of
each penny stock held in the customer's account. The bid and offer
quotations, and the broker/dealer and salesperson compensation information,
must be given to the customer orally or in writing prior to effecting the
transaction and must be given to the customer in writing before or with the
customer's confirmation. These disclosure requirements have the effect of
reducing the level of trading activity in the secondary market for
Americlean's common stock. As a result of the foregoing, investors in this
offering may find it more difficult to sell their shares.
DILUTION AND COMPARATIVE SHARE DATA
As of April 30, 1999, the present shareholders of Americlean owned
5,423,090 shares of Common Stock. The following table illustrates the
comparative stock ownership of the present shareholders of Americlean, as
compared to the investors in this Offering, assuming all shares offered are
sold.
<PAGE>
Number of Note
Shares Reference
Shares outstanding as of April 30, 1999 (1) 5,423,090
Shares to be issued upon conversion of
Series A Preferred Stock, assuming
conversion price of $2.50 per share 240,000 A
Shares issuable upon exercise of sales agent 16,800 B
warrants, assuming warrant exercise price
of $2.50 per share
Shares issuable upon exercise of options 200,000 C
granted to consultants
Shares outstanding upon completion of offering (1) 5,879,000
Pro forma net tangible book value per share as of
December 31,1998 (2) $0.03
Equity ownership by present shareholders
after this offering 92%
Equity ownership by investors in this Offering 8%
(1) Amount excludes shares which may be issued upon the exercise and/or
conversion of options, warrants and other convertible securities
previously issued by Americlean. See table below.
(2) Gives effect to issuance of Series A Preferred Stock subsequent to
December 31, 1998 and assumes conversion of preferred stock and
exercise of options.
"Net tangible book value" is the amount that results from subtracting
the total liabilities and intangible assets of Americlean from its total
assets. Tangible assets exclude goodwill. The purchasers of the securities
offered by this Prospectus will suffer dilution in their investment if the
price paid for the shares offered by this Prospectus is greater that the
net tangible book value of Americlean's common stock at the time of such
purchase.
Other Shares Which May Be Issued:
The following table lists additional shares of Americlean's Common
Stock which may be issued as the result of the exercise of outstanding
options, warrants or the conversion of other securities issued by
Americlean:
<PAGE>
Number of Note
Shares Reference
Shares issuable upon exercise of options 174,500 D
granted to Company's officers, directors,
and employees
Notes
A. In April 1999 Americlean sold 600 shares of its Series A Preferred
Stock for $600,000. Thirty days after the date of this Prospectus each
Series A Preferred Share will convert into shares of Americlean's common
stock equal in number to the amount determined by dividing $1,000 by 75%
of the average price of Americlean's Common Stock for the five trading
days preceding the conversion date. The actual number of shares to be
issued upon the conversion of the Series A Preferred Shares may be
greater than 240,000 shares and will depend upon the price of
Americlean's common stock at the time of conversion.
B. In connection with the sale of the Series A Preferred Shares, Anthony
Advisors, the Sales Agent for such offering, received a cash commission
of $42,000, plus warrants to purchase $42,000 worth of Americlean's
common stock (the "Sales Agent Warrants"). The number of shares
issuable upon the exercise of the Sales Agents Warrants is determined by
dividing $42,000 by 75% of the average price of Americlean's common
stock during the five trading days preceding the warrant exercise date.
The Sales Agent Warrants are exercisable at a price equal to 75% of the
average price of Americlean's common stock during the five trading days
preceding the date the warrant is exercised.
C. Americlean has granted options for the purchase of 200,000 shares of
common stock to a consultant in consideration for services provided
to Americlean. The options are exercisable at a price of $2.00 per
share and expire on January 15, 2003.
D. See "Management - Stock Option Plans" for information concerning
these options.
The 200,000 shares referred to in notes A, B, and C above are being
offered for sale to the public by means of this prospectus. See "Selling
Shareholders".
MARKET FOR AMERICLEAN'S COMMON STOCK
As of April 30, 1999, there were approximately 60 record holders of
Americlean's common stock. Americlean believes the number of beneficial
owners is greater due to shares held by brokers, banks, and others for the
benefit of their customers. Americlean's common stock is traded on the
National Association of Securities Dealers OTC Bulletin Board. Set forth
below are the range of high and low bid quotations for the periods
indicated as reported by the NASD. The market quotations reflect
interdealer prices, without retail mark-up, mark-down or commissions and
may not necessarily represent actual transactions. Americlean's common
stock began trading in February 1998. The market quotations have been
adjusted to reflect a one-for-four reverse stock split which was effective
in January 1999.
<PAGE>
Common Stock
Quarter Ending High Low
3/31/98 $9.76 $7.00
6/30/98 $9.36 $6.52
9/30/98 $8.12 $3.76
12/3l/98 $2.88 $1.12
3/31/99 $3.94 $2.93
Holders of common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available
therefor and, in the event of liquidation, to share pro rata in any
distribution of Americlean's assets after payment of liabilities. The Board
of Directors is not obligated to declare a dividend. Americlean has not
paid any dividends on its common stock and Americlean does not have any
current plans to pay any common stock dividends.
The provisions in Americlean's Articles of Incorporation relating to
Americlean's Preferred Stock would allow Americlean's directors to issue
Preferred Stock with rights to multiple votes per share and dividends
rights which would have priority over any dividends paid with respect to
Americlean's common stock. The issuance of Preferred Stock with such rights
may make the removal of management difficult even if such removal would be
considered beneficial to shareholders generally, and will have the effect
of limiting shareholder participation in certain transactions such as
mergers or tender offers if such transactions are not favored by incumbent
management.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The following selected financial data should be read in conjunction
with the more detailed financial statements, related notes and other
financial information included elsewhere in this Prospectus.
Except for an isolated sale of perc to a single customer during
fiscal 1998, the operations of Americlean were limited prior to March 1999.
On March 3, 1999 Americlean acquired substantially all of the assets of
Boggs & Company, Inc. and JKG Group, Inc. (collectively "Boggs").
Accordingly, the following financial data and Management's Discussion and
Analysis of the selected financial data includes the financial condition
and results of operations of both Americlean and Boggs.
<PAGE>
Americlean currently derives all of its revenues from the sale and
servicing of dry cleaning and commercial laundry equipment and supplies.
Although Americlean reports in U.S. dollars, a portion of its
business is conducted in currencies other than the American dollar,
primarily the Canadian dollar. As a result, fluctuations in the value of
the U.S. dollar relative to the Canadian dollar could adversely affect
operating results. Foreign currency translation gains and losses arising
from normal business operations are credited to or charged against
operations in the period incurred.
AMERICLEAN
Statement of Operations Data:
Nine Months Ended
Year Ended March 31, 1998 December 31, 1998
Sales $1,111,374 -
Cost of Sales (1,020,931) -
Operating Expenses (404,746) (1,105,978)
-------- ----------
Net (Loss) $(314,303) $(1,105,493)
========== ============
Balance Sheet Data:
March 31, 1998 December 31, 1998
----------------- -----------------
Current Assets $896,657 $10,313
Total Assets 906,626 61,622
Current Liabilities 861,207 233,557
Total Liabilities 861,207 233,557
Working Capital (Deficit) 35,450 (223,244)
Shareholders' Equity (Deficit) 45,419 (171,935)
BOGGS
Statement of Operations Data:
Year Ended Three Months Ended
September 30, 1998 December 31,1998
Sales $13,926,182 $3,084,570
Cost of Sales (10,306,873) (2,296,003)
Operating Expenses (4,008,913) (857,801)
Non-Operating Expenses (200,360) (36,325)
--------- --------
Net Loss $(589,964) $(105,559)
========== ==========
<PAGE>
Balance Sheet Data:
September 30, 1998 December 31, 1998
Current Assets $3,787,477 $3,579,869
Total Assets 4,103,815 3,871,411
Current Liabilities 4,413,141 4,295,210
Total Liabilities 4,561,236 4,434,392
Working Capital (Deficit) (625,664) (715,341)
Shareholders' Equity (Deficit) (457,421) (562,981)
No Common Stock dividends have been declared by Americlean since its
inception.
AMERICLEAN OPERATING RESULTS
Americlean has been operating since March of 1997. Except for an
isolated sale of perc to a single customer in 1998, the operation of
Americlean prior to the acquisition of Boggs was limited to developing a
sophisticated business model for the dry cleaning and commercial laundry
supply industry and engaging in negotiations to acquire various operating
companies in this industry and in the hazardous waste recycling industry.
The acquisition of the assets of Boggs represents the first step in
implementing this business model.
Nine Month Period Ended December 31, 1998 Compared to the Nine Month Period
Ended December 31, 1997
Sales: During this period Americlean had no material revenues as it was
developing its business model and evaluating various target acquisitions in
the dry cleaning and commercial laundry supply industry and the hazardous
waste recycling industry.
Operating Expenses: Americlean incurred administrative and selling expenses
of $1,105,978 during the nine month period ended December 31, 1998, the
bulk of which ($629,872) was expended on advertising, promotion and
investor relations profile The remainder of the administrative and selling
expenses incurred were for travel ($91,569), consulting and professional
fees ($229,320) and various other operating and business development costs
($155,217). The expenditures by Americlean on administrative and selling
expenses for the nine month period ended December 31, 1997 were $141,431
which were largely attributed to wages and benefits, professional fees,
advertising, consulting fees and rent. Administrative and selling expenses
increased 682% between the subject nine-month periods reflecting the
increased activity of Americlean's management team in developing the
business model.
<PAGE>
Year ended March 31, 1998 Compared to the Year ended March 31, 1997
Sales: During the year ended March 31, 1998 Americlean had gross revenues
of $1,111,374 as compared to $50,474 in the preceding fiscal period.
Americlean only made one sale of perc to one customer in the year ended
March 31, 1998 and the figure of $1,111,374 represents this sale. During
the period ended March 31, 1997 Americlean's gross revenues of $50,474 were
attributed to the provision of consulting services and sales of
Americlean's proprietary detergent products.
Cost of Sales: Cost of sales were 1,020,931 for the year ended March 31,
1998, representing 92% of the costs of goods sold. During the year ended
March 31, 1997 costs of sales were $27,443, representing 54% of the costs
of goods sold. The decrease in gross margin can be attributed to the
isolated, bulk sale of perc as numerous individual sales would have
justified increased margin.
Operating Expenses: Administrative and selling expenses increased primarily
due to the increased activity of Americlean's management team in developing
the business model as well as outside contracting for engineering and
consulting services in conjunction with the development of the business
model and Americlean's proprietary recycling process.
BOGGS OPERATING RESULTS
Three Month Period Ended December 31, 1998 compared to Three Month Period
Ended December 31, 1997
Sales: During the three month period ended December 31, 1998 Boggs had
gross sales of $3,084,570 as compared to $3,424,617 during the three month
period ended December 31, 1997, a decrease of 10%. The decrease in revenues
was attributable to a conscious decision by management to increase gross
margin by eliminating less profitable accounts and accounts which were
delinquent in payment.
Cost of Sales: Cost of sales as a percentage of gross revenues decreased
from 77% for the three month period ended December 31, 1997 to 74% for the
three month period ended December 31, 1998. The corollary increase in gross
margin as a percentage of revenues from 23% for the three month period
ended December 31, 1997 to 26% for the three month period ended December
31, 1998 reflects the positive results of management's strategy to increase
gross margin by eliminating less profitable accounts and accounts which
were delinquent in payment.
<PAGE>
Selling, General and Administrative Expenses: Selling, general and
administrative expenses for the three month period ended December 31, 1998
decreased 16% from those incurred in the three month period ended December
31, 1997. This reduction was a result of the completion by Americlean of
its transition from low margin dry cleaning and laundry equipment sales.
Year Ended September 30, 1998 compared to Year Ended September 30, 1997
Sales: Sales decreased in the year ended September 30, 1998 as a result of a
decline in equipment sales.
Cost of Sales: Cost of sales as a percentage of gross revenues decreased
due to management's efforts to improve gross margins on the sale of dry
cleaning supplies.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses for the year ended September 30, 1998 increased as a
result of the acquisition of JKG Group, Inc. during this fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
To date, Americlean has invested approximately $500,000 into Boggs to
retire debt, acquire equipment and reduce Americlean'ssecured debt.
Americlean has finalized arrangements to lease new premises in
Charlotte, North Carolina. The premises will expand the square footage
under lease from 27,000 square feet to 34,000 square feet, which space will
allow for the expansion of the business to include the manufacture and sale
of hangers and the blending and bottling of detergents as well as the
implementation of Americlean's proprietary recycling process. In the longer
term Americlean also plans to manufacture and distribute poly bags.
Americlean expects that the business acquired from Boggs will be
profitable as the result of the implementation of financial controls,
manufacturing (as opposed to purchasing) certain products, and the
implementation of a customer service program to assist its existing
customer base. The re-location of Americlean's operations to the new
facility, coupled with new inventory management systems and a reduction in
staffing levels is expected to reduce costs..
General and administrative expenses are expected to decline as the
duplication between the Vancouver, British Columbia office and Charlotte,
North Carolina office is eliminated.
In order to expand its operations Americlean will need additional
capital. As of the date of this prospectus Americlean did not have any
commitments from any source to provide additional capital to Americlean.
Between April 1997 and April 1999 Americlean sold 348,623 shares of
its Common Stock to private investors and received cash proceeds of
$1,272,167 from the sale of these shares.
On March 26, 1999, Americlean entered into a agreements with two
creditors pursuant to which it settled debts totaling $206,507.05 by the
issuance of 413,014 shares of common stock.
In April 1999 Americlean sold 600 shares of its Series A Preferred
stock to a group of private investors at a price of $1,000 per share.
<PAGE>
YEAR 2000 ISSUE
The "Year 2000 Issue" is a term used to describe a problem
encountered by certain computer programs where dates have been written
using two digits rather than four. Computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in system failures or
miscalculations causing disruptions of operations including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. Management of Americlean has
reviewed Americlean's exposure to the Year 2000 issue and the risk to
Americlean's operations of any adverse effects arising from that issue.
Results to date indicate that Americlean will be required to update certain
aspects of the computer systems at its North Carolina and Florida
facilities and accordingly Americlean has initiated corrective measures by
engaging the services of Oracle Corp. to deploy and implement a new
computer system which will be Year 2000 compatible. Americlean expects that
this system will be in place by the third quarter of 1999 and accordingly
management does not expect the Year 2000 Issue to have a material adverse
effect upon the operations of Americlean. Americlean is having, and will
continue to have, communications with all of its suppliers, and other third
parties to determine the extent, if any, to which Americlean's systems
could by impacted by any third party Year 2000 issues. Americlean could be
adversely affected if systems operated by third parties providing services
to Americlean are not Year 2000 compliant.
BUSINESS
Americlean sells laundry and dry cleaning supplies and equipment to
customers in North Carolina, South Carolina, Virginia, Tennessee, Georgia
andFlorida. The supplies include hangers, poly bags, bleaches, solvent
spotters, production control tags, packing and various other items. The
equipment sold by Americlean includes dry cleaning machines, shirt
finishing presses, boilers, and conveyers. Americlean also provides parts,
installations and service to its customers. Americlean has a customer base
of over 2,000 dry cleaners, laundries, hospitals, nursing homes, and
hotels; none of which accounts for more than 2% of total sales. Americlean
employs over sixty people, operates its own fleet of delivery trucks and
service vans. Americlean's main distribution center is located in
Charlotte, North Carolina, with branches in Jacksonville and St.
Petersburg, Florida. Americlean also has offices in Burbank, California and
Carmel, Indiana through which it distributes dry cleaning solvents and
provides consulting services to dry cleaning operators.
At the present time, Americlean does not manufacture any of the
products which it distributes, but rather purchases these products from
approximately 100 vendors.
With the exception of labor, the products distributed by Americlean
represent the largest percentage of an average dry cleaner's operating
expenses.
Americlean was incorporated in Delaware on March 3, l997. In March
l997 Americlean, in exchange for 1,250,000 shares of Americlean's Common
Stock, acquired an affiliated Canadian corporation which was involved in
the treatment of a dry cleaning solvent known as perc. The Canadian
corporation, Americlean Western Canada Ltd., operated a perc treatment
center in Canada between June and September 1996. Except for an isolated
sale of perc to a single customer during fiscal 1998, the operations of
Americlean were limited prior to March 1999. On March 3, 1999 Americlean
acquired substantially all of the assets of Boggs & Company, Inc. and JKG
Group, Inc. ("Boggs"). Prior to its acquisition by Americlean. Boggs was a
distributor of laundry and dry cleaning supplies and equipment in the
southern United States. On April 28, 1999 Americlean acquired all of the
shares of Universal EnviroClean Systems, Inc., a dry cleaning solvent
distributor and consultant with offices in Burbank, California and Carmel,
Indiana.
FUTURE OPERATIONS
Americlean intends to combine three separate revenue streams:
manufacturing, distribution, and hazardous waste recycling. To date, these
services have not been combined due to the lack of waste handling and
processing expertise within industry-established manufacturing and
distribution channels. The North American dry cleaning industry is
represented by over 36,000 licensed dry cleaning plants and over 400
wholesale distributors. The economics of distribution force the
manufacturers of products to utilize the multi-tier distribution channel
that is currently in place. Americlean intends to improve upon this
distribution model by acquiring or building plants within metropolitan
regions that represent 69% of the $7.2 billion market and providing a perc
waste recycling service along with the distribution of products
manufactured by Americlean.
Americlean plans to distribute its own line of dry cleaning
detergents and cleaning solutions, wire clothes hangers and all of the
associated cardboard accessories, and polyethylene (poly) plastic covers
used by dry cleaners. Americlean's strategy is to introduce and develop
brand-marketing awareness of its own manufactured products and reduce
Americlean's dependence on third party manufactured goods.
Americlean also intends to offer a recycling service for perc, a
hazardous waste used by dry cleaners. The perc recycling service will be
offered as a cost competitive alternative to the current practice of
incinerating or fuel blending, a practice that is heavily scrutinized and
may soon be banned. Americlean intends to combined the distribution of dry
cleaning supplies with the perc treatment to position Americlean in
existing and new markets.
Americlean plans to offer this service, an environmentally desirable
alternative to disposal, at a significantly lower cost to the dry cleaner.
Americlean's proprietary refining process meets or exceeds the most
stringent North American environmental regulations while rendering
value-added products from the original waste stream.
ACQUISITION OF DRY CLEANING SUPPLY DISTRIBUTORS
Americlean plans to acquire additional distributors of dry cleaning
supplies and equipment. Initially Americlean will concentrate its efforts
on distributors serving customers in the eastern United States and which
have annual sales of at least $10,000,000 and at least 500 customers.
The acquisition of one or more dry cleaning distributors will require
additional financing and/or the willingness of the owners of the
distributors to accept shares of Americlean's Common Stock in partial
payment of the purchase price of the distributor's business. Americlean
does not have any agreements relating to the acquisition of additional dry
cleaning distributors other than as disclosed herein. There can be no
assurance that Americlean will be able to acquire any additional
distributors of dry cleaning supplies.
<PAGE>
CONSTRUCTION OF DRY CLEANING SUPPLY AND PERC TREATMENT PLANTS
Americlean, contingent upon the availability of additional financing,
plans to establish of a number of dry cleaning and laundry supply plants in
the United States. Americlean's plants will supply a variety of items which
are used in the day-to-day operation of a dry cleaning establishment,
including chemical supplies, detergents, carbon filters, hangers and
plastic polyethylene covers. These plants will also have the capability of
processing perc, a toxic material used by dry cleaners.
Each plant, if built, will have the capacity to process approximately
500,000 gallons of perc per month. Americlean expects that it will require
three to six months and cost between $1,200,000 and $1,500,000 to construct
and equip each plant. At the present time Americlean did not have
sufficient capital to build any plants. In addition, Americlean does not
have any permits or licenses which will be required for perc processing
since each plant will need to comply with waste removal and disposal laws.
Accordingly, there can be no assurance that Americlean will ever be able to
construct one or more of its proposed plants.
DRY CLEANING SUPPLIES
At the present time the supplies and detergents sold by Americlean
are purchased from third party vendors. Depending on the availability of
additional capital, Americlean plans to manufacture its own line of dry
cleaning detergents and cleaning solutions.
The supplies and detergents which Americlean plans to manufacture
will include sizing (provides a garment's "finish") and pre-spot stain
removal products and will be developed to meet the specific needs of the
dry cleaning industry. Americlean plans to offer industrial, regular and
delicate formulations to allow for a variety of fabric types and cleaning
requirements. In addition, these products will employ perc as a suspension
agent to reduce the problems associated with filler products that leave a
trace residue. Americlean plans to distribute these products in bulk and in
smaller plastic containers, depending on customer requirements. The
chemicals will be bottled, mixed and formulated by Americlean.
HANGERS
The average dry cleaner uses 50,000 hangers per year. The cost of
wire hangers is the single largest expense of goods consumed by the typical
dry cleaning plant. Americlean recently acquired hanger manufacturing
equipment for its plant in North Carolina. The hangers will be manufactured
and supplied with either custom printed paper sleeves, or as plain, painted
hangers. The cost of this equipment was approximately $92,500. Americlean
plans to install this equipment in the second quarter of 1999.If sufficient
capital is available, the Company intends to acquire hanger manufacturing
equipment for each of its distribution facilities, as well as equipment
that manufactures the wire used by hanger machines. This wire fabrication
equipment strips wire from larger cables, which reduces the cost of raw
materials by 50%. The hangers will be manufactured and supplied with either
custom printed paper sleeves, or as plain, painted hangers.
<PAGE>
POLY BAGS
Polyethylene plastic covers ("poly bags") are used extensively in the
dry cleaning industry to protect cleaned garments pending their delivery to
the customer. Initially, Americlean will use third parties to manufacture
the poly bags that it will supply to its dry cleaning customers. However,
based on preliminary research, Americlean believes that it may be cost
effective to manufacture its own poly bags and have each Company plant
supply poly bags to dry cleaners in the geographic region serviced by the
plant. The estimated cost of the equipment required to supply poly bags to
four plants is approximately $1,125,000.
PERC TREATMENT
Using a proprietary refining process which separates and
decontaminates hazardous waste, Americlean plans to collect and process
perc, a toxic chemical used by the dry cleaning industry.
Perc, the primary solvent in the dry cleaning process, is used in the
same manner as water is used in domestic washing machines, however perc is
continually reused until it evaporates or is burned off by the operator. A
reliable source of perc is essential to a dry cleaner's day to day
operations. It is estimated by the U.S. Environmental Protection Agency
("EPA") that 100,000 short tons of perc are used in the U.S. dry cleaning
industry annually.
The basic technology used in Americlean's refining process was developed
by Canadian Solvent Recovery Ltd. ("CSR). This technology, used by CSR between
1990 and March 1996, processes a hazardous waste (known as "perc") used by dry
cleaning establishments. In May l996, the assets of CSR, which included CSR's
perc treatment plant in Calgary, were acquired by Americlean Western Canada
Ltd. for $388,000. American Western Canada Ltd. was subsequently acquired by
Americlean in March 1997.
Perc-contaminated waste is a by-product of the dry cleaning process.
This waste is defined as a hazardous material by the EPA. Regulations vary
from state to state, however maximum contamination levels are generally in
the range of 0.7 parts per million.
The United States has 23,213 dry cleaners, generating $5.1 billion in
annual sales. Most dry cleaners do not have the capital required to
purchase the equipment necessary to treat and dispose of perc waste
generated in the normal course of business. As a result, Americlean's
processing and treatment service provides a cost effective solution to dry
cleaners' waste disposal problem.
Americlean expects that it will cost approximately $1,200,000 to
construct and equip a Perc treatment plant in Charlotte, North Carolina.
Accordingly Americlean will need additional capital to construct and equip
this plant and as a result, there can be no assurance that Americlean will
be able do so.
If Americlean is able to process perc, perc generated by Americlean's
customers will be collected by Company trucks on a monthly basis.
Americlean will also supply the dry cleaner with the containment barrels
necessary to store the waste prior to its removal from the site and will
replace the full drums with clean, empty drums on every scheduled pick up.
Americlean plans to charge $9.00 per gallon to collect and process perc
contaminated waste.
<PAGE>
Americlean's proprietary technology utilizes multiple mechanical
distillation processes and bioremediation to liquefy and separate sludge
components into perc, oil, grease and water. These components are then
refined and treated to restore them to a non-hazardous (less than 0.7 parts
per million) level. Recyclable material (perc, solvents, oil and grease) is
sold to existing customers or unrelated third parties. This process is
completed without the use of either incinerators or hazardous disposal
sites. The following is a summary description of Americlean's perc
recycling technology:
1. The sludge waste is subjected to a grinding and filtering
process which removes any solid, foreign materials. These are
usually in the form of poly bags and lint.
2. The perc waste is then pumped to a separator, where it is
distilled and 99.9% of the perc is removed. The perc is then
routed to a secondary distillation and treatment tank for ph.
balancing.
3. The oil and grease stream from the first separation process is
distilled again at a much higher temperature, removing any
remaining perc. A generic solvent is created as a by product of
this process, which may be sold to cement manufacturers and oil
refineries.
4. The remaining oil and grease is processed to remove any
contaminating water or solids. Once the oil and grease has been
purified the oil is bulk stored for sale as a bunker grade
crude.
5. The remaining water is treated by gray water distillation,
which strips any remaining contaminants and restores the water
for plant use.
6. The solids, 80% of which are organic, are then pumped into
tanks where a biological process consumes 95% of the waste. The
remaining solids (approximately 5% ) are shipped to land fills
as non-hazardous waste.
On average Americlean is able to reclaim approximately 20% of the net
waste stream processed by volume as perc solvent which can then be treated
and restored to a 99.7% purity. At present, the demand for recycled perc
exceeds supply. Accordingly, Americlean plans to limit the distribution of
recycled perc to those commercial customers who will also purchase
detergents and related dry cleaning products from Americlean. Americlean
plans to sell recycled perc to commercial dry cleaners at a price of $6.50
per gallon.
Since it is not feasible to construct a plant in every major city,
Americlean plans to construct transfer stations that will serve surrounding
municipalities. A transfer station will bulk-load waste containers for rail
or truck shipment to Americlean's perc treatment plants. In larger urban
areas Americlean intends to construct plants capable of processing the
waste from numerous transfer stations, allowing Americlean to provide
service to surrounding urban areas without building a separate processing
plant. Transfer stations only require adequate space to store supplies and
house a 22-foot or a 45-foot container tank.
<PAGE>
Currently perc is distributed by manufacturers to large chemical
wholesalers. The perc is then sold to small, regional dry cleaning supply
companies, many of which do not possess chemical handling or delivery
licenses. The distribution of perc continues to be scrutinized by the EPA.
Americlean believes it can efficiently distribute perc to dry
cleaners on a regular basis, at the time of waste collection, without
incurring additional transportation costs. It is expected that Americlean's
delivery trucks will be equipped with dual lined containers for safe bulk
perc delivery to dry cleaning plants. Americlean has also designed a
proprietary closed-loop delivery system which utilizes a portable pump,
further reducing the risk of spill or vapor loss during perc transfers.
Americlean expects that it will be able to purchase perc at $5.85 per
gallon and sell the perc to dry cleaning establishments at an average
retail price of $7.95 per gallon. If Americlean increases its volumes,
Americlean expects that it will be able to purchase perc directly from
manufacturers, further reducing its cost to $4.00 per gallon.
DRY CLEANING FILTERS
Dry cleaning filters are used to reduce impurities occurring in perc
during a normal cleaning cycle. The filters attract and collect suspended
contaminants in the perc during the cleaning process. The most common
impurities are dyes, lint and dirt residues. The filters increase the
utility of perc, which in turn extends the periods between distillation.
There are three international sizes of dry cleaning filters, regular,
splits and jumbos. Approximately 70% of the dry cleaning machines operating
in North America use regular size filters.
In addition to collecting and treating perc, Americlean plans to
distribute filters to dry cleaning establishments and collect and treat
used filters.
The collection and recycling of dry cleaning filters will be handled
in a similar fashion to that used for perc-contaminated residues. Dry
cleaning filters consist of three component parts; tin casing, long-fiber
paper and lignite carbon. Filters will be collected from the dry cleaners
every four weeks. Collected filters will be placed in large, stainless
steel, air tight containers aboard trucks and the containers will then be
off-loaded at the transfer stations or processing plants. Upon arrival at
the plant the containers will be connected to a steam fitting which
decontaminates the filters by releasing any perc retained in the carbon in
the form of a vapor. The perc vapor and water will be distilled and the
perc recycled and processed to its original specifications.
Following the steaming process the tin casing of each filter will be
opened and the component parts recycled. The long-fiber paper inserts will
be resold to a variety of markets with demand for such material, and the
tin casings will be forwarded to a local smelter as scrap metal. The
lignite carbon will then be reactivated to its original utility
specifications utilizing a rotary air kiln at temperatures in excess of
1,750(degree) F. This recycled carbon will subsequently be resold for use
in the industry or to filter manufacturers.
<PAGE>
Americlean initially plans to sub-contract the carbon reactivation
process. However, Americlean may in the future acquire its own carbon
reactivation equipment.
Americlean has designed a re-usable stainless steel cartridge which
contains a cylindrical carbon and long-fiber paper insert, much like a tea
bag, that can be easily removed and replaced once the carbon has been
spent. This entire component could then be processed in a kiln as the paper
filter would flash burn far before the reactivation temperature of
1,750(degree) F. Americlean believes this reusable cartridge, designed to
fit all existing hardware in the marketplace, will significantly reduce the
cost of dry cleaning filters. The reusable cartridge is only in the
prototype stage and has not been manufactured on a commercial basis.
At some point in the future Americlean may attempt to acquire a
national manufacturer of carbon filters so as to lower its cost of filters
sold to dry cleaning establishments.
ENVIRONMENTAL REGULATION
Many dry cleaners have been operating in the same manner for the last
twenty or more years, because the cleaning process has remained largely
unchanged during that time, except for minor hardware improvements in
equipment designed to improve solvent (perc) efficiency. However, as the
harmful effects of perc exposure have become more widely documented,
environmental concerns over the use of perc as a solvent in the dry
cleaning process have been raised at both industry and government levels.
Despite these concerns, however, there is currently no effective and
available method of dry cleaning clothes that does not use perc save and
except for hydrocarbon-based solvents. Alternate cleaning processes are in
development which may achieve nominal market penetration by the year 2000
but additional increasesmay be unlikely based on their current level of
development.
Americlean is of the opinion that perc will not be replaced as the
primary solvent in the dry cleaning industry in the near future and that
over the medium term the industry may move towards hydrocarbon based
solvents. At the present time over 90% of the dry cleaners in the United
States use perc. An alternative technology or solvent which could dry clean
clothes without perc would require cleaners to replace their existing
machines, and to a small business, the cost of such hardware is
prohibitive, in terms relative to the revenues generated and generally
amortized over ten to twenty years, based on industry averages. Acceptance
of any new technology in the industry must therefore be slow, as existing
machines would continue to be used for several years until their
replacement becomes financially feasible or mechanically necessary. Perc
use will also continue to be supported by the machinery and chemical
industries, since it is in their best interest to maintain the status quo.
Americlean is confident that perc, or a similar solvent, will continued to
be used by the industry, and that solvent recycling will be increasingly
supported by the EPA, ensuring a demand for Americlean's environmental
services. To the extent that the industry moves towards hydrocarbon based
solvents, Americlean's acquisition of Universal EnviroClean Systems Inc.,
which distributes proprietary hydrocarbon based solvents and consults with
operators who wish to utilize these solvents, provides Americlean with a
hedge against such movement.
<PAGE>
SALES, MARKETING AND COMPETITION
The $7.2 billion North American dry cleaning market is dependable
with modest growth. Virtually all dry cleaning plant owner/operators are
independent with little chain influence. The competition is independent and
fractionated for both plant owners and distributors. The products and
equipment sold for the most part have very little or no obsolescence.
The only segment of the market that experiences some periodic
expansion and contraction is equipment sales. Since the summer of 1997
sales of dry cleaning machines have been soft due to some user concerns as
to solvent regulations. However, as new machines and solvent enter the
market Americlean believes sales of machinery will improve.
Many firms distribute dry cleaning supplies, with no one organization
being a dominant force in the industry. Many companies supply equipment and
hardware while maintaining a limited inventory of chemicals and peripheral
products. However, limited resources are expended to market and promote
these products since these distributors do not consider the sale of dry
cleaning chemicals and detergents as a primary business activity. Due to
the lack of product sophistication and competition in the marketplace,
Americlean believes it can obtain sales from those dry cleaners which use
Americlean for perc collection and treatment. Americlean believes that a
key factor in obtaining these sales is often the dry cleaner's trust
relationship with the supplier and regular personal contact with the
supplier's customer service representatives. Americlean believes it will
have an advantage in providing dry cleaning establishments with both perc
waste collection as well as industry related products.
Tri Waste, Laidlaw, and Safety Clean all provide hazardous waste
collection to dry cleaning establishments, but none recycles perc. Instead,
each of these companies blends the waste collected for incineration fuel,
or uses it to make a generic solvent once it is reclaimed through a
distillation process. The remaining waste is then disposed of by
incineration or in hazardous materials land-fill sites. However, the
incineration of halogenated solvents is under scrutiny by North American
environmental agencies and may be eliminated within the next two years.
ACQUISITION OF BOGGS
In March 1999 Americlean acquired substantially all of the assets of
Boggs & Company, Inc. and JKG Group, Inc. (collectively "Boggs") for
$75,000 in cash and 80,724 shares of Americlean's Common Stock. As part of
this acquisition Americlean assumed approximately $560,000 of liabilities
in excess of assets purchased. An additional $25,000 in cash and an
additional 80,723 shares of Common Stock are being held in escrow and will
be delivered to Boggs in the event that certain representations concerning
the liabilities of Boggs prove to be accurate.
As part of the acquisition of Boggs, Americlean agreed to employ two
of Boggs' officers for five years at a collective annual salary of $136,000
and to issue to such officers options which would permit them to purchase
up to 54,500 shares of Americlean's Common Stock at a price of $4.00 per
share at any time prior to March 3, 2004.
<PAGE>
Prior to its acquisition by Americlean, Boggs was a distributor of
laundry and dry cleaning supplies and equipment in the southern United
States.
See Management's Discussion and Analysis and the financial statements
in this Prospectus for financial information of Boggs.
ACQUISITION OF UNIVERSAL
In April of 1999 Americlean acquired all of the shares of Universal
EnviroClean Systems, Inc. in consideration for the agreement by Americlean
to invest the sum of $180,000 over a twelve week period into the business
of Universal.
Americlean also agreed to guarantee the obligations of Universal to
the principals of Universal pursuant to certain employment agreements. The
employment agreements provide that each of the two principals of Universal
will be paid $100,000 per annum for a term of one year. Americlean has also
granted to the two principals of Universal options which would permit them
to purchase up to 20,000 shares of Americlean's Common Stock at a price of
$3.25 per share at any time prior to April 29, 2000.
Universal's gross assets at the date of the acquisition were
approximately $60,000, its gross liabilities were approximately $30,000 and
Universal had revenues during its past fiscal year of approximately
$1,000,000.
PROPOSED ACQUISITION OF LBE
Americlean has entered into a letter agreement with L.B.E., Inc. of
Hammond, Indiana dba A-M Supply Company) and a related company, Pio L.L.C.
pursuant to which Americlean may acquire the business of LBE and a property
owned by Pio for gross consideration of $900,000 in cash and $1,100,000
worth of shares of Americlean's Common Stock. The agreement is subject to
numerous conditions in favour of Americlean including the preparation of
audited financial statements for the target business, a positive due
diligence review by Americlean of the target business' operations and
Americlean being able to obtaining financing on terms acceptable to it as
required to operate and acquire the business of LBE and the property.
Accordingly, there is no guarantee that the results of the due diligence
review will be positive or that Americlean will be able to obtain the
financing required to complete the acquisition necessary to close this
transaction.
LBE's gross revenues for the year ended December 31, 1998 were
approximately $10,000,000 producing gross margin of approximately 22%. LBE
has assets of approximately $2,400,000 and liabilities of approximately
$2,100,000.
EMPLOYEES
As of April 30, 1999 Americlean had approximately 65 full-time
employees. Contingent upon Americlean raising sufficient capital,
Americlean plans to hire additional employees as may be required by the
level of Americlean's operations.
<PAGE>
PROPERTIES
Americlean's corporate and administrative offices are located at 1177
W. Hastings Street, Suite 1910, Vancouver, British Columbia, Canada V6E
2K3. Americlean's dry cleaning supply and distribution center is located in
Charlotte, North Carolina and consists of 27,000 square feet of office and
warehouse space. Americlean also maintains branch offices in Jacksonville
and St. Petersburg, Florida, Carmel, Indiana and Burbank, California.
Americlean has finalized arrangements to lease new premises in Charlotte,
North Carolina. The premises will expand the square footage under lease
from 27,000 square feet to 34,000 square feet, which space will allow for
the expansion of the business to include the manufacture and sale of
hangers and the blending and bottling of detergents as well as the
implementation of Americlean's proprietary recycling process.
MANAGEMENT
Name Age Position with Americlean
Andrew Hromyk 33 President, Chief Executive Officer,
Treasurer, and a Director
Brett Walker 32 Vice President and a Director
Jose Lourenco 45 Vice President and a Director
Douglas Porter 53 Director
Valerie Moschetti 44 Secretary
Andrew Hromyk has been an officer and director of Americlean since
March l997. Since July 1995 Mr. Hromyk has also been the President and a
director of AmericleanWestern Canada Ltd., Americlean's predecessor. Since
November l993, Mr. Hromyk has been the president of Century Capital
Management Ltd., a financial and business consulting firm. From September
l995 to March l996, Mr. Hromyk was the vice president of Canadian Solvent
Recovery, Ltd. From November l99l to May l992, Mr. Hromyk was a consultant
to the General Motors Special Products Division. From July l989 to November
l992, Mr. Hromyk owned and operated various car dealerships in Vancouver,
British Columbia which specialized in the sale of foreign and collectible
automobiles.
Brett Walker has been an officer and director of Americlean since March
l997. Since June l995 Mr. Walker has been the vice president of Americlean
Western Canada Ltd., Americlean's predecessor. From June l992 to December
l995 Mr. Walker was Director of Production and Distribution for Petrovalve
International, Inc., a company engaged in the distribution of oil and gas
products. From 1990 to 1992 Mr. Walker was an officer of Eros Environmental
Technologies, Ltd. an oil spill recovery firm.
<PAGE>
Jose Lourenco has been an officer and director of Americlean since
March l997. Since l997 Mr. Lourenco has also been the President of Aquasol
Technologies Inc., a corporation which is engaged in the development of
waste water treatment technology. From l993 to l996 Mr. Lourenco was Vice
President of AquaTex Corporation, a company engaged in the treatment of
water and waste-water. From l991 to l993 Mr. Lourenco was president of
Noralto Metal Fabrications, a company engaged in sheet metal, piping and
pressure vessel fabrication. In l982 Mr. Lourenco received a degree in
chemical engineering from the Technical University of Nova Scotia.
Doug Porter has been a director of Americlean since September of 1998.
Mr. Porter has been the President of Douglas Chemical, a formulary and dry
cleaning chemical manufacturer, since 1988 and owns and operates nine retail
dry cleaning plants. Mr. Porter has more than twenty years of dry cleaning
and industry experience.
Valerie Moschetti has been the Secretary of Americlean since October
of 1998. Ms. Moschetti has acted as a corporate secretary for various
public companies and has provided administrative services to various
corporate organizations since 1987.
EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation
received by Americlean's Chief Executive Officer. No executive officer of
Americlean received in excess of $100,000 during the fiscal year ended
March 31, 1999.
Other Re-
Annual stricted
Compen- Stock Options
Name and Fiscal Salary Bonus sation Awards Granted
Principal Position Year (1) (2) (3) (4) (5)
Andrew Hromyk,
President and Chief 1999 - - $17,500 2,550,000 25,000
Executive Officer 1998 - - $23,500 -- --
1997 - - $ 3,000 -- --
(1) The dollar value of base salary (cash and non-cash) received.
(2) Th edollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or
property. Amounts in the table represent consulting fees paid to a
corporation controlled by Mr. Hromyk.
(4) The shares of Americlean's Common Stock were issued as compensation
for services in name of Century Capital Management, Ltd., a Company
controlled by Mr. Hromyk.
<PAGE>
The table below shows the number of shares of Americlean's Common
Stock owned by Mr. Hromyk and the value of such shares as of March 31,
1999.
Name Shares Value
Andrew Hromyk 3,084,375 $11,373,632
(5) The shares of Common Stock to be received upon the exercise of all
stock options granted during the year ending March 31, 1999.
Proposed Compensation
The following shows the amount which Americlean expects to pay to its
executive officers during the twelve months ending March 31, 2000 and the
time which Americlean's executive officers plan to devote to Americlean's
business. Americlean does not have employment agreements with any of its
officers.
Proposed Time to be Devoted
Name Compensation To Company's Business
Andrew Hromyk $125,000 75%
Brett Walker $100,000 100%
Jose Lourenco Nil 20%
Valerie Moschetti Nil 20%
Americlean's Board of Directors may increase the compensation paid to
Americlean's officers depending upon the results of Americlean's future
operations.
EMPLOYMENT AGREEMENTS
Americlean does not have any written employment contracts with any of
its executive officers and does not have any compensatory plan or
arrangement that results or will result from the resignation, retirement,
or any other termination of any executive officer's employment with
Americlean or from a change in-control of Americlean or a change in an
executive officer's responsibilities following a change in-control.
In March 1999 Americlean acquired the dry cleaning business formerly
owned by Boggs & Company and JGK Group, Inc. In connection with this
acquisition Americlean entered into employment agreements with two former
officers of Boggs. Each employment agreement provides for a term of five
years and an annual salary of $68,000. In April 1999 Americlean acquired
the dry cleaning solvent distribution business and consultancy Universal
EnviroClean Systems, Inc. In connection with this acquisition Americlean
entered into employment agreements with the two principals of Universal.
Each employment agreement provides for a term of one year and an annual
salary of $100,000.
<PAGE>
LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
None.
EMPLOYEE PENSION, PROFIT SHARING OR OTHER RETIREMENT PLANS
Americlean does not have a defined benefit, pension plan, profit
sharing or other retirement plan, although Americlean may adopt one or more
of such plans in the future.
COMPENSATION OF DIRECTORS
Standard Arrangements
At present Americlean does not pay its directors for attending
meetings of the Board of Directors, although Americlean expects to adopt a
director compensation policy in the future. Americlean has no standard
arrangement pursuant to which directors of Americlean are compensated for
any services provided as a director or for committee participation or
special assignments.
Other Arrangements
During the year ending March 31, 1999 Americlean granted options to
purchase 25,000 shares of Common Stock to each of Americlean's four
directors. See "Stock Option Plans" below for information concerning these
options.
Except as disclosed elsewhere in this Prospectus no director of
Americlean received any form of compensation from Americlean during the
year ended March 31, 1999.
STOCK OPTION PLANS
Americlean has an Incentive Stock Option Plan and a Non-Qualified
Stock Option Plan. A summary description of each Plan follows. In some
cases these two Plans are collectively referred to as the "Plans".
Incentive Stock Option Plan
The Incentive Stock Option Plan authorizes the issuance of options to
purchase up to 250,000 shares of Americlean's Common Stock. The Incentive
Stock Option Plan became effective on January 1, 1999 and will remain in
effect until January 1, 2009 unless terminated earlier by action of the
Board. Only officers, directors and key employees of Americlean may be
granted options pursuant to the Incentive Stock Option Plan.
In order to qualify for incentive stock option treatment under the
Internal Revenue Code, the following requirements must be complied with:
<PAGE>
1. Options granted pursuant to the Plan must be exercised no later
than:
(a) The expiration of thirty (30) days after the date on which
an option holder's employment by Americlean is terminated.
(b) The expiration of one year after the date on which an option
holder's employment by Americlean is terminated, if such
termination is due to the employee's disability or death.
2. In the event of an option holder's death while in the employ of
Americlean, his legatees or distributees may exercise (prior to the
option's expiration) the option as to any of the shares not previously
exercised.
3. The total fair market value of the shares of Common Stock
(determined at the time of the grant of the option) for which any employee
may be granted options which are first exercisable in any calendar year may
not exceed $100,000.
4. Options may not be exercised until one year following the date of
grant. Options granted to an employee then owning more than 10% of the
Common Stock of Americlean may not be exercisable by its terms after five
years from the date of grant.
5. The purchase price per share of Common Stock purchasable under an
option is determined by the Board of Directors but cannot be less than the
fair market value of the Common Stock on the date of the grant of the
option (or 110% of the fair market value in the case of a person owning
Americlean's stock which represents more than 10% of the total combined
voting power of all classes of stock).
Non-Qualified Stock Option Plan
The Non-Qualified Stock Option Plan authorizes the issuance of options
to purchase up to 250,000 shares of Americlean's Common Stock. The
Non-Qualified Stock Option Plan became effective on July 6, 1998.
Americlean's employees, directors, officers, consultants and advisors are
eligible to be granted options pursuant to the Non-Qualified Stock Option
Plan, provided however that bona fide services must be rendered by such
consultants or advisors and such services must not be in connection with
the offer or sale of securities in a capital-raising transaction. The
option exercise price is determined by the Board of Directors.
Options granted pursuant to the Non-Qualified Stock Option Plan
terminate on the date established by the Board of Directors when the option
was granted.
Other Information Regarding the Plans
The Plans are administered by Americlean's Board of Directors. The
Board of Directors has the authority to interpret the provisions of the
Plans and supervise the administration of the Plans. In addition, the Board
of Directors is empowered to select those persons to whom options are to be
granted, to determine the number of shares subject to each grant of an
option and to determine when, and upon what conditions or options granted
under the Plans will vest or otherwise be subject to forfeiture and
cancellation.
<PAGE>
In the discretion of the Board of Directors, any option granted
pursuant to the Plans may include installment exercise terms such that the
option becomes fully exercisable in a series of cumulating portions. The
Board of Directors may also accelerate the date upon which any option (or
any part of any options) is first exercisable. Any options granted pursuant
to the Incentive Stock Option Plan or the Non-Qualified Stock Option Plan
will be forfeited if the "vesting" schedule established by the Board of
Directors at the time of the grant is not met. For this purpose, vesting
means the period during which the employee must remain an employee of
Americlean or the period of time a non-employee must provide services to
Americlean. At the time an employee ceases working for Americlean (or at
the time a non-employee ceases to perform services for Americlean), any
options not fully vested will be forfeited and cancelled. In the discretion
of the Board of Directors payment for the shares of Common Stock underlying
options may be paid through the delivery of shares of Americlean's Common
Stock having an aggregate fair market value equal to the option price,
provided such shares have been owned by the option holder for at least one
year prior to such exercise. A combination of cash and shares of Common
Stock may also be permitted at the discretion of the Board of Directors.
Options are generally non-transferable except upon death of the option
holder.
The Board of Directors of Americlean may at any time, and from time
to time, amend, terminate, or suspend one or more of the Plans in any
manner it deems appropriate, provided that such amendment, termination or
suspension cannot adversely affect rights or obligations with respect to
shares or options previously granted.
The Plans are not qualified under Section 401(a) of the Internal
Revenue Code, nor are they subject to any provisions of the Employee
Retirement Income Security Act of 1974.
Summary
The following sets forth certain information as of April 30, 1999,
concerning the stock options granted by Americlean. Each option represents
the right to purchase one share of Americlean's Common Stock.
Total Shares
Shares Reserved for Remaining
Reserved Outstanding Options
Name of Plan Under Plan Options Under Plan
Incentive Stock Option Plan 250,000 74,500 175,500
Non-Qualified Stock Option
Plan 250,000 100,000 150,000
<PAGE>
Options Granted
The following tables set forth information concerning the
options granted, during the fiscal year ended March 31, 1999 to Company's
officers and directors, and the fiscal year-end value of all unexercised
options (regardless of when granted) held by these persons.
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted (#) Fiscal Year Share Date
Andrew Hromyk 25,000 16.2% $4.00 01/01/2009
Brett Walker 25,000 16.2% $4.00 01/01/2009
Jose Lourenco 25,000 16.2% $4.00 01/01/2009
Douglas Porter 25,000 16.2% $4.00 01/01/2009
Option Exercises and Fiscal Year End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
Andrew Hromyk -- -- 25,000/-- -/-
Brett Walker -- -- 25,000/-- -/-
Jose Lourenco -- -- 25,000/-- -/-
Douglas Porter -- -- 25,000/-- -/-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Americlean has issued shares of its common stock to the following
persons, who are or were affiliated with Americlean:
Date of Number
Name Issuance of Shares Consideration
Andrew Hromyk 3/97 625,000(1) 50% of the issued and out-
standing shares of American
Western Canada Ltd.
Current Investments Ltd. 3/97 625,000 50% of the issued and out-
standing shares of American
Western Canada Ltd.
Brett Walker 3/97 125,000 $10,000
Mark Harrison 3/97 125,000 $10,000
<PAGE>
Bona Vista West Ltd. 3/99 363,014 Settlement of loan in the
amount of $181,507
Current Investments Ltd. 3/99 50,000 Settlement of loan in
the amount of $25,000
Andrew Hromyk 3/99 2,550,000 Services rendered
Brett Walker 3/99 450,000 Services rendered
(1) Shares were issued to Century Capital Management Ltd., a corporation
controlled by Mr. Hromyk. Century Capital Management Ltd. subsequently
transferred 187,500 of these shares to four persons, none of whom are
affiliated with Americlean.
During the nine months ended December 31,1998 Americlean paid Century Capital
Ltd. $124,123 in consulting, rent and administrative fees. Century Capital
Ltd. is controlled by Andrew Hromyk, an officer and director of the Company.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 30, 1999, information
with respect to the only persons owning beneficially 5% or more of
Americlean's outstanding common stock and the number and percentage of
outstanding shares owned by each director and officer and by the officers
and directors as a group. Unless otherwise indicated, each owner has sole
voting and investment powers over his shares of common stock.
Shares of Percent of
Name and Address Common Stock Class (1)
Andrew Hromyk 3,084,375 (2) 55.3%
Suite 103
2190 Argyle Street
West Vancouver, B.C.
Canada V7V 1G6
Brett Walker 575,000 10.3%
Suite 303
2405 W. 2nd Ave.
Vancouver, B.C.
Canada V6V 1S5
Jose Lourenco -- --
367 Lessard Drive
Edmonton, Alberta
Canada T6M 1A6
<PAGE>
Valerie Moschetti -- --
834 East 15th Avenue
Vancouver, B.C.
V5T 2R9
Douglas Porter -- --
1627 West Main Street
Suite 143
Bozeman, Montana 59715
Bona Vista West Ltd. 363,014 6.5%
P.O. Box 62
2001 Leeward Highway
Turks and Caicos Islands
British West Indies
All Officers and Directors 3,659,375 65.7%
as a Group (5 persons)
(1) Number of shares owned excludes shares issuable upon the exercise of
options held by the following persons.
Name Shares Subject to Option
Andrew Hromyk 25,000
Jose Lourenco 25,000
Brett Walker 25,000
Douglas Porter 25,000
(2) Shares are registered in the name of Century Capital Management Ltd., a
corporation controlled by Mr. Hromyk.
SELLING SHAREHOLDERS
In April 1999 Americlean raised $600,000 from the sale of 600 shares of
Americlean's Series A Preferred Stock. The Preferred Shares will convert
into shares of Americlean's common stock 30 days after the date of this
Prospectus. See "Dilution and Comparative Share Data". The shares issuable
upon the conversion of the Series A Preferred Shares are being offered to
the public by means of this Prospectus.
This Prospectus also relates to the sale of up to 216,800 shares of
Americlean's common stock issuable upon the exercise of warrants and
options issued to a sales agent and to a consultant to Americlean.
<PAGE>
The holders of the Preferred Shares, the sales agent warrants and the
options, to the extent they convert their Preferred Shares into shares of
common stock or exercise the warrants or options, are referred to in this
Prospectus as the Selling Shareholders. Americlean will not receive any
proceeds from the sale of the shares by the Selling Shareholders.
The names of the Selling Shareholders are:
Shares Which Shares
May Be Which
Acquired May Be
Upon Acquired
Conversion Upon Shares Share
Shares of Series A Exercise to be Ownership
Beneficially Preferred of Warramts in this After
Name Owned Shares or Options Offering(1) Offering
- ---------- ------- ------------ ---------- --------- --------
Anthony James Stavros -- 20,000 -- 20,000 --
Susan C. Buescher -- 20,000 -- 20,000 --
Karron L. Heathman, -- 20,000 -- 20,000 --
Trustee
Allan J. Brda -- 8,000 -- 8,000 --
James David -- 10,000 -- 10,000 --
Bommarito
D. Michael McDaniel -- 10,000 -- 10,000 --
So. County Investors -- 30,000 -- 30,000 --
Anthony D. Cupini, -- 14,000 -- 14,000 --
IRA Acct.
Britannia Development -- 18,000 -- 18,000 --
Company Limited
Armory Facilities -- 10,000 -- 10,000 --
Thomas C. Hullverson, -- 80,000 -- 80,000 --
IRA Acct.
Anthony Advisors -- -- 16,800 16,800 --
Phoenix Alliance, Inc. -- -- 200,000 200,000 --
(1) Assumes a conversion price of $2.50 per share.
Manner of Sale. The shares of common stock which may be acquired by
the Selling Shareholders may be offered and sold by means of this
Prospectus from time to time as market conditions permit in the
over-the-counter market, or otherwise, at prices and terms then prevailing
or at prices related to the then-current market price, or in negotiated
transactions. These shares may be sold by one or more of the following
methods, without limitation: (a) a block trade in which a broker or dealer
so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; and (d) face-to-face transactions between sellers and
purchasers without a broker/dealer. In making sales, brokers or dealers
engaged by the Selling Shareholders may arrange for other brokers or
dealers to participate. These brokers or dealers may receive commissions or
discounts from Selling Shareholders in amounts to be negotiated.
<PAGE>
The costs of registering the shares offered by the Selling
Shareholders are being paid by Americlean. The Selling Shareholders will
pay all other costs of the sale of the shares offered by them.
From time to time one or more of the Selling Shareholders may
transfer, pledge, donate or assign the shares received upon the conversion
of the Series A Preferred Stock or the warrants or options referred to
above (the "Conversion Shares") to lenders or others and each of such
persons will be deemed to be a Selling Shareholder for purposes of this
Prospectus. The number of Conversion Shares beneficially owned by those
Selling Shareholders will decrease as and when they transfer, pledge,
donate or assign the Conversion Shares. The plan of distribution for the
Conversion Shares sold by means of this Prospectus will otherwise remain
unchanged, except that the transferees, pledgees, donees or other
successors will be Selling Shareholders for purposes of this Prospectus.
A Selling Shareholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of
Americlean's common stock in the course of hedging the positions they
assume with such Selling Shareholder, including, without limitation, in
connection with the distribution of Americlean's common stock by such
broker-dealers. A Selling Shareholder may also enter into option or other
transactions with broker-dealers that involve the delivery of the common
stock to the broker-dealers, who may then resell or otherwise transfer such
common stock. A Selling Shareholder may also loan or pledge the common
stock to a broker-dealer and the broker-dealer may sell the common stock so
loaned or upon default may sell or otherwise transfer the pledged common
stock.
Broker-dealers, underwriters or agents participating in the
distribution of Americlean's common stock as agents may receive
compensation in the form of commissions, discounts or concessions from the
Selling Shareholders and/or purchasers of the common stock for whom such
broker-dealers may act as agent, or to whom they may sell as principal, or
both (which compensation as to a particular broker-dealer may be less than
or in excess of customary commissions). Selling Shareholders and any
broker-dealers who act in connection with the sale of common stock
hereunder may be deemed to be "Underwriters" within the meaning of the
Securities Act, and any commissions they receive may be deemed to be
underwriting discounts and commissions under the Securities Act. Neither
Americlean nor any Selling Shareholder can presently estimate the amount of
such compensation. Americlean knows of no existing arrangements between any
Selling Shareholder, any other stockholder, broker, dealer, underwriter or
agent relating to the sale or distribution of Americlean's common stock.
The Selling Shareholders and any broker/dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"
within the meaning of ss.2(11) of the Securities Acts of 1933, and any
commissions received by them and profit on any resale of the Shares as
principal might be deemed to be underwriting discounts and commissions
under the Securities Act.
Americlean has advised the Selling Shareholders that they and any
securities broker/dealers or others who may be deemed to be statutory
underwriters will be subject to the Prospectus delivery requirements under
the Securities Act of 1933. Americlean has also advised the Selling
Shareholders that in the event of a distribution of the shares owned by the
Selling Shareholder, such Selling Shareholders, any affiliated purchasers,
and any broker/dealer or other person who participates in such distribution
may be subject to Rule 102 under the Securities Exchange Act of 1934 ("1934
Act") until their participation in that distribution is completed. A
<PAGE>
distribution is defined in Rule 102 as an offering of securities "that is
distinguished from ordinary trading transactions by the magnitude of the
offering and the presence of special selling efforts and selling methods".
Americlean has also advised the Selling Shareholders that Rule 102 under
the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase" for
the purpose of pegging, fixing or stabilizing the price of the Common Stock
in connection with this offering. Rule 101 makes it unlawful for any person
who is participating in a distribution to bid for or purchase stock of the
same class as is the subject of the distribution.
DESCRIPTION OF SECURITIES
COMMON STOCK
Americlean is authorized to issue 50,000,000 shares of common stock,
(the "Common Stock"). Holders of common stock are each entitled to cast one
vote for each share held of record on all matters presented to
shareholders. Cumulative voting is not allowed; hence, the holders of a
majority of the outstanding common stock can elect all directors.
Holders of common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available for
dividends and, in the event of liquidation, to share pro rata in any
distribution of Americlean's assets after payment of liabilities. The board
is not obligated to declare a dividend. It is not anticipated that
dividends will be paid in the foreseeable future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by Americlean. There are no conversion,
redemption, sinking fund or similar provisions regarding the common stock.
All of the outstanding shares of common stock are fully paid and
nonassessable and all of the shares of common stock issued upon the
conversion of the Series A Preferred Stock or the exercise of the warrants
or options described in this prospectus will be, upon issuance, fully paid
and non-assessable.
PREFERRED STOCK
Americlean is authorized to issue up to 5,000,000 shares of Preferred
Stock. Americlean's Articles of Incorporation provide that the Board of
Directors has the authority to divide the Preferred Stock into series and,
within the limitations provided by Delaware statute, to fix by resolution
the voting power, designations, preferences, and relative participation,
special rights, and the qualifications, limitations or restrictions of the
shares of any series so established. As the Board of Directors has
authority to establish the terms of, and to issue, the Preferred Stock
without shareholder approval, the Preferred Stock could be issued to defend
against any attempted takeover of Americlean.
In March 1999, Americlean's Board of Directors established Americlean's
Series A Preferred Stock and authorized the issuance of up to 600 shares of
Series A Preferred Stock as part of this series. Upon any liquidation or
dissolution of Americlean, each outstanding share of Series A Preferred
Stock is entitled to distribution of $1,000 per share prior to any
distribution to the holders of Americlean's common stock. The Series A
<PAGE>
Preferred Shares are not entitled to any dividends or voting rights. In
April 1999, Americlean sold 600 shares of its Series A Preferred Stock to a
group of private investors for $1,000 per share. Thirty days after the date
of this Prospectus each Series A Preferred Share will convert into shares
of Americlean's common stock equal in number to the amount determined by
dividing $1,000 by 75% of the average price of Americlean's common stock
for the five trading days preceding the conversion date. The shares
issuable upon the conversion of the Series A Preferred Shares are being
offered for sale to the public by means of this Prospectus. See "Selling
Shareholders".
LITIGATION
Americlean is named as a defendant under a lawsuit launched by the
estate of a former employee on September 11, 1998. The plaintiff has
claimed approximately $330,000 and 87,500 free trading shares of
Americlean's common stock for settlement of this action. Americlean
believes that it has a meritorious defense to the claims of the former
employee and that the ultimate resolution of this action will not have a
material adverse effect on Americlean's financial condition or results of
operations.
Americlean has also had a default judgement entered against it for
approximately $30,000 in favour of an Alberta company which disposed of
certain waste products for Americlean. Americlean has entered into an
agreement to settle this judgement by paying approximately $25,000 to the
Alberta company in stages.
Other than the foregoing, Americlean is not a party to any pending
legal proceeding.
EXPERTS
The financial statements of Americlean audited by Ernst & Young LLP
have been included herein in reliance on their report given on their
authority as experts in accounting and auditing.
The Combined Balance Sheets of Boggs & Company, Inc. and JKG Group,
Inc. as of September 30, 1998 and 1997, and the Combined Statements of
Operations and Retained Earnings (Deficit) and Cash Flows for two years
then ended have been included herein in reliance on the report of Bullard &
Blanchard, P.L.L.C., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
INDEMNIFICATION
Americlean's bylaws authorize indemnification of a director, officer,
employee or agent of Americlean against expenses incurred by him in
connection with any action, suit, or proceeding to which he is named a
party by reason of his having acted or served in such capacity, except for
liabilities arising from his own misconduct or negligence in performance of
his duty. In addition, even a director, officer, employee, or agent of
Americlean who was found liable for misconduct or negligence in the
performance of his duty may obtain such indemnification if, in view of all
the circumstances in the case, a court of competent jurisdiction determines
such person is fairly and reasonably entitled to indemnification. Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may be permitted to directors, officers, or persons controlling Americlean
pursuant to the foregoing provisions, Americlean has been informed that in
the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is therefore
unenforceable.
<PAGE>
AVAILABLE INFORMATION
Americlean has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 together with all amendments and
exhibits, under the Securities Act of 1933, as amended with respect to the
securities offered by this Prospectus. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement. The Registration Statement and amendments and exhibits may also
be reviewed at the Internet Web Site maintained by the Securities and
Exchange Commission at www.sec.gov.
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY .................................................
RISK FACTORS .......................................................
DILUTION AND COMPARATIVE SHARE DATA ................................
MARKET FOR AMERICLEAN'S COMMON STOCK ...............................
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION ..............................................
BUSINESS ............................................................
MANAGEMENT ...........................................................
PRINCIPAL SHAREHOLDERS .................................................
SELLING SHAREHOLDERS .....................................................
DESCRIPTION OF SECURITIES ..................................................
LITIGATION....................................................................
EXPERTS....................................................................
INDEMNIFICATION ............................................................
AVAILABLE INFORMATION......................................................
FINANCIAL STATEMENTS .......................................................
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus,
and if given or made, such information or representations must not be
relied upon as having been authorized by Americlean. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any
of the securities offered in any jurisdiction to any person to whom it is
unlawful to make such an offer in such jurisdiction. Neither the delivery
of this Prospectus nor any sale made in this Prospectus shall, under any
circumstances, create any implication that the information in this
prospectus is correct as of any time subsequent to the date of this
Prospectus or that there has been no change in the affairs of Americlean
since such date.
Until _________,1999 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
<PAGE>
PART III
Information Not Required in Prospectus
Item 24. Indemnification of Officers and Directors.
The Delaware Business Corporation Act and the Company's Bylaws provide
that the Company may indemnify any and all of its officers, directors,
employees or agents or former officers, directors, employees or agents,
against expenses actually and necessarily incurred by them, in connection
with the defense of any legal proceeding or threatened legal proceeding,
except as to matters in which such persons shall be determined to not have
acted in good faith and in the best interest of the Company.
Item 25. Other Expenses of Issuance and Distribution.
SEC Filing Fee $843
NASD Filing Fee 1,343
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 2,000
Legal Fees and Expenses 25,000
Accounting Fees and Expenses 10,000
Miscellaneous Expenses 3,814
-----
TOTAL $45,000
All expenses other than the S.E.C. and NASD filing fees are estimated.
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities of the Company
which have been sold during the past three years and which securities were not
registered under the Securities Act of 1933, as amended. Unless otherwise
indicated, the consideration paid for the shares was cash. All share amounts
have been adjusted to reflect the Company's four-for-one reverse stock split was
effective in January 1999.
Shares of
Date of Sale Name Common Stock Consideration
04/10/97 Century Capital Management Ltd. 625,000 50% of the issued
and outstanding
shares of Americlean
Western Canada Ltd.
<PAGE>
04/10/97 Current Investments Ltd. 625,000 50% of the issued
and outstanding
shares of Americlean
Western Canada Ltd.
04/10/97 Walker, Brett 125,000 $10,000
04/10/9 Harrison, Mark 125,000 10,000
04/15/97 Procopis, Plato 2,500 20,000
04/24/9 Mavrofrides, Christos 500 4,000
05/15/9 Josephson, Mark 125 1,000
05/16/9 Stahl, William A. and Noreen F. 625 5,000
05/25/97 Shaw, William A. 250 2,000
05/26/9 Andrews, Arthur R. and Cathy R. 175 1,400
05/28/97 Horsham Finance Limited - 75,000 to
Whalen, Beliveau & Associates, Inc. 18,750 150,000
05/29/9 James, Sonia J. 125 1,000
05/30/97 Hugessen, Alex 175 1,400
05/30/97 Long, Richard N. 250 2,000
05/30/97 McGaw, Ross 875 7,000
06/02/97 Proietti, Anthony M. 25 250
06/03/97 Verdi, James E. 25 250
06/04/97 Hadley, James C. Jr. 50 500
06/04/97 Halpern, Tyler J. 25 250
06/04/97 Pagano, T.J. 25 250
06/04/97 Siciliano, Stanley 25 250
06/05/97 Parent, James 25 250
06/05/97 Roberti, Adrienne J. 25 250
06/05/97 Roberti, Arnold J. 25 250
06/05/97 Roberti, Peter E. 25 250
06/05/97 Sohn, Bernie 25 250
06/05/97 Verdi, Mark S. 25 250
06/05/97 Wong, Whie L. 25 250
06/05/97 Yacono, Sam A. 25 250
06/06/97 Bowles, Tom 25 250
06/06/97 DeGeorge, Dawn Ann 25 250
06/06/97 Hoyt, Jeffrey C. 25 250
06/06/97 Kapil, Hari 1,562 12,500
06/06/97 Sakkalis, Nikanthros 3,411 27,288
06/06/97 Nuciola, Phillip 25 250
06/06/97 Shi, Hong Qing 25 250
06/07/97 Mouchecourt, Eric G. 25 250
06/10/97 Proietti, Anthony L. 25 250
10/24/97 Mills, Robert E. 5,000 20,000
10/24/97 Seedhouse, Jack 5,000 20,000
01/20/98 Pereira, Manuel D. 1,875 11,250
01/22/98 Dixon, Bryan J. 1,250 10,000
<PAGE>
04-24-98 Skalko, James 25,000 100,000
04-28-98 Tradewinds Investments Ltd. 2,500 10,000
04-27-98 Lenz, Frederick A. 5,000 20,000
04-27-98 Britannia Development Company Limited 5,000 20,000
04-27-98 Hassan Abdul S.A. 25,000 100,000
05-04-98 Nostradamus S.A. 25,000 100,000
05-04-98 Edwards Capital Corporation 15,000 60,000
05-06-98 Phoenix Capital 2,500 10,000
06-10-98 Dashguard Securities Limited 20,000 80,000
06-10-98 Malco L. Investments 2,500 10,000
07-01-98 Sure Lock Inc. 2,500 10,000
07-01-98 Edwards Capital Corporation 12,500 50,000
07-02-98 Matthew P.T. Holstein 1,875 7,500
07-02-98 Phillip M. Holstein 1,875 7,500
08-12-98 Keith A. Mazer 18,750 75,000
08-12-98 Matthew P.T. Holstein 12,500 50,000
08-12-98 Thundercloud Corporation
Money Purchase Pension Plan,
Philip M. Holstein, Jr. Trustee 6,250 25,000
08-12-98 Philip M. Holstein 6,250 25,000
08-12-98 Phoenix Capital Corporation 9,375 37,500
08-13-98 Edwards Capital Corporation 25,000 100,000
08-13-98 C. Jesse Reggio 6,250 25,000
03-10-99 Edwards Capital Corporation 5,000 5,000
03-10-99 Bona Vista West, Ltd. 70,000 70,000
03-31-99 Bona Vista West, Ltd. 363,014 Payment of loan in
principal amount of
$187,507
03-31-99 Current Investments, Ltd. 50,000 Payment of loan in
principal amount of
$25,000
Andrew Hromyk 2,550,000 Services rendered
03-31-99 Brett Walker 450,000 Services rendered
Shares of
Series A
Date Name Preferred Stock Consideration
04-05-99 Anthony James Stavros 50 $50,000
04-05-99 Susan C. Buescher 50 $50,000
04-05-99 Karron L Heathman, Trustee 50 $50,000
04-05-99 Allan J. Brda 20 $20,000
<PAGE>
04-05-99 James David Bommarito 25 $25,000
04-05-99 D. Michael McDaniel 25 $25,000
04-05-99 South County Investors 75 $75,000
04-05-99 Alpco for the benefit of
Anthony D. Cupini, IRA account 35 $35,000
04-05-99 Britannia Development Company Limited 45 $45,000
04-05-99 Armory Facilities 25 $25,000
04-05-99 Alpco for the benefit of
Thomas C. Hullverson, IRA account 200 $200,000
All sales of the Company's Common Stock prior to March 31, 1999 were
exempt from registration pursuant to Rule 504 of the Securities and Exchange
Commission.
All sales of the Company's common stock on March 31, 1999 were exempt
from Registration pursuant to Section 4 (2) of the Securities Act of 1933. All
shares of common stock issued on March 31, 1999 were acquired for investment
purposes only and without a view to distribution. All of the persons who
acquired these shares of common stock were fully informed and advised about
matters concerning the Company, including its business, financial affairs and
other matters. The purchasers of the Company's common stock acquired the
securities for their own accounts. The certificates evidencing the shares of
common stock bear legends stating that the shares represented by the
certificates may not be offered, sold or transferred other than pursuant to an
effective registration statement under the Securities Act of 1933, or pursuant
to an applicable exemption from registration. All shares of common stock sold on
March 31,1999 are "restricted" securities as defined in Rule 144 of the Rules
and Regulations of the Securities and Exchange Commission.
All sales of the Company's Series A Preferred Stock were exempt from
registration pursuant to Rule 506 of the Securities and Exchange Commission. All
shares of the Preferred Stock were acquired for investment purposes only and
without a view to distribution. All of the persons who acquired the Company's
Preferred Shares were fully informed and advised about matters concerning the
Company, including its business, financial affairs and other matters. The
purchasers of the Company's Preferred Stock acquired the securities for their
own accounts. The certificates evidencing the Preferred Shares will bear legends
stating that they may not be offered, sold or transferred other that pursuant to
an effective registration statement under the Securities Act of 1933, or
pursuant to an applicable exemption from registration. All the Preferred Shares
are "restricted" securities as defined in Rule 144 of the Rules and Regulations
of the Securities and Exchange Commission.
<PAGE>
Item 27. Exhibits
Exhibits Page Number
1 Underwriting Agreement N/A
3.1 Certificate of Incorporation and Amendments
3.2 Certificate of Designation of Series A
Preferred Stock
3.3 Bylaws
4.1 Incentive Stock Option Plan
4.2 Non-Qualified Stock Option Plan
5 Opinion of Counsel
10 Asset Purchase Agreement - Boggs & Company
23.1 Consent of Hart and Trinen
23.2 Consent of Accountants
24. Power of Attorney Included as part of the
Signature Page
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement.
(i) To include any Prospectus required by Section l0(a)(3)
of the Securities Act of l933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) any addition or deletion of a managing underwriter.
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) To provide to the Underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of l933 may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Vancouver, British
Columbia, on the 14th day of May, 1999.
AMERICLEAN, INC.
By /s/ Andrew Hromyk
Andrew Hromyk, President
By /s/ Brett Walker
Brett Walker, Principal Financial
Officer and Chief Accounting Officer
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Title Date
/s/ Andrew Hromyk
Andrew Hromyk Director May 14, 1999
/s/ Brett Walker
Brett Walker Director May 14, 1999
/s/ Jose Lourenco
Jose Lourenco Director May 14, 1999
/s/ Douglas Porter
Douglas Porter Director May 14, 1999
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
(United States Dollars)
AMERICLEAN, INC.
March 31, 1998 and 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Americlean, Inc.
We have audited the accompanying consolidated balance sheets of Americlean, Inc.
as of March 31, 1998 and 1997 and the related consolidated statements of loss
and comprehensive loss, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Americlean, Inc.
at March 31, 1998 and 1997 and the consolidated results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
Vancouver, Canada August 31, 1998 [except for note 11[b] which is as of
September 26, 1998]
<PAGE>
Americlean, Inc.
CONSOLIDATED BALANCE SHEETS
[See Basis of Presentation - Note 1]
As at March 31
1998 1997
$ $
ASSETS
Current
Cash 115,879 --
Accounts receivable [note 3] 780,778 --
Mortgage receivable [note 4] -- 169,188
Total current assets 896,657 169,188
Property and equipment [note 5] 9,969 6,674
906,626 175,862
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued
liabilities 846,689 24,815
Due to related parties [note 6] 14,518 45,607
Total liabilities 861,207 70,422
Commitment and contingency [note 9]
Stockholders' equity
Share stock [note 7]
Common stock, $0.0001 par value 616 600
50,000,000 authorized, 6,158,150
issued outstanding
Preferred stock, $0.0001 par value
5,000,000 authorized, nil issued
or outstanding
Share stock to be issued 500 --
Additional paid in capital 435,819 188,956
Cumulative translation adjustment 6,318 (585)
Deficit (397,834) (83,531)
Total stockholders' equity 45,419 105,440
906,626 175,862
See accompanying notes
On behalf of the Board:
Director Director
<PAGE>
Americlean, Inc.
CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS
Years ended March 31
1998 1997
$ $
Sales [note 3] 1,111,374 50,474
Cost of sales 1,020,931 27,443
Gross profit 90,443 23,031
Other income -- 1,588
90,443 24,619
Administrative and selling expenses
Advertising and promotion 47,450 1,598
Automobile 573 2,375
Bad debts 4,992 --
Bank charges and interest 2,005 1,348
Consulting fees [note 6] 41,245 13,961
Depreciation 1,995 1,658
Loss on disposition of equipment 3,228 --
Office and other 6,764 5,318
Professional fees 26,801 30,731
Rent 9,270 3,035
Telephone and fax 13,880 1,904
Travel 18,779 11,025
Utilities 9,439 5,356
Valuation allowance on mortgag
receivable [note 4] 164,013 --
Wages and employee benefits 54,312 29,841
404,746 108,150
Net loss for the year (314,303) (83,531)
Other comprehensive income:
Translation adjustment 6,903 (585)
Comprehensive loss for the year (307,400) (84,116)
Basic and diluted loss per share
[note 7[d]] 0.05 5.08
See accompanying notes
<PAGE>
Americlean, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
March 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK ADDITIONAL CUMULATIVE
NUMBER PAID-IN TRANSLATION
OF SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT TOTAL
# $ $ $ $ $
Balance March 31, 1996 10 10 -- -- -- 10
Issuance of common stock
[note 7[b]]
- - for shares and mortgage
receivable 4,999,990 490 168,699 -- -- 169,189
- - for cash 1,000,000 100 20,257 -- -- 20,357
Unrealized exchange loss -- -- -- (585) -- (585)
Net loss for the year -- -- -- -- (83,531) (83,531)
Balance, March 31, 1997 6,000,000 600 188,956 (585) (83,531) 105,440
Issuance of common stock
[note 7[b] 158,150 16 246,863 -- -- 246,879
Common stock to be issued
[note 7[c]] -- 500 -- -- -- 500
Unrealized exchange gain -- -- -- 6,903 -- 6,903
Net loss for the year -- -- -- -- (314,303) (314,303)
Balance, March 31, 1998 6,158,150 1,116 435,819 6,318 (397,834) 45,419
See accompanying notes
</TABLE>
<PAGE>
Americlean, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31
1998 1997
$ $
OPERATING ACTIVITIES
Net loss for the year (314,303) (83,531)
Adjustments to reconcile net loss to
net cash used in
operating activities:
Depreciation 1,995 1,658
Loss on disposition of equipment 3,228 --
Valuation allowance on mortgage
receivabl 164,013 --
Changes in non-cash working capital:
Accounts receivable (780,778) --
Accounts payable and accrued liabilities 821,874 24,815
Net cash used in operating activities (103,971) (57,058)
INVESTING ACTIVITIES
Acquisition of property and equipment (1,491) (8,342)
Net cash used in investing activities (1,491) (8,342)
FINANCING ACTIVITIES
Proceeds from stock issuance [note 1] 246,879 20,367
Shares subscriptions received 500 --
Advances from (to) related parties (31,089) 45,607
Net cash provided by financing activities 216,290 65,974
Effect of exchange rate changes on cash 5,051 (574)
Net increase in cash during the year 115,879 --
Cash, beginning of year -- --
Cash, end of year 115,879 --
See accompanying notes
<PAGE>
Americlean, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 1998 AND 1997
1. FORMATION AND BUSINESS OF THE COMPANY
Americlean, Inc. was incorporated on March 3, 1997 in Delaware. Americlean's
subsidiary, Americlean Western Canada Ltd. ("AWCL"), was incorporated on July
24, 1995. On March 31, 1997, Americlean, Inc. acquired a $169,189 mortgage
receivable and all the issued and outstanding share stock of AWCL in exchange
for 5,000,000 Americlean, Inc. common shares issued from treasury.
At the time of this transaction, the same individuals (the "Transferors") owned
all the shares of Americlean, Inc., AWCL and the mortgage receivable. These
financial statements have been presented on a continuity of interests basis in a
manner similar to pooling of interests accounting. The assets and liabilities
acquired by Americlean, Inc. have been recorded at the Transferors carrying
values. The results of operations and changes in financial position for periods
before March 3, 1997 are those of AWCL. These entities are referred to in these
financial statements as the "Company".
The Company is engaged in the business of recycling and selling dry cleaning
products to North American markets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company prepares its accounts in accordance with accounting principles
generally accepted in the United States.
The following is a summary of the significant accounting policies used in the
preparation of these financial statements:
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary AWCL. All significant intercompany accounts and
transactions have been eliminated.
Translation
The Company's reporting currency is the United States dollar ($) and its
functional currency for Canadian operations is the Canadian dollar (C$). Except
for share stock transactions, the Company conducts substantially all its
business in C$. The conversion to the reporting currency has been done using
rates at March 31, 1998 and March 31, 1997. Revenue and expense items are
recorded at the exchange rate at the transaction date. Translation adjustments
are recorded as comprehensive income and as a separate component of
stockholders' equity.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from these estimates.
Financial instruments
Amounts reported for cash, accounts receivable, mortgage receivable, accounts
payable and accrued liabilities and due to related parties are considered to
approximate fair value primarily due to their short maturities.
Property and equipment
Property and equipment are stated at cost and are being depreciated on a
straight-line basis over the estimated useful lives of the related assets (5
years).
Revenue recognition
Revenue from the sale of product is recognized at the time of shipment.
Income taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Recognition of deferred tax
assets is limited to amounts considered by management to be more likely than not
of realization in future periods.
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash in the bank. The
Company maintains cash with high quality financial institutions. Also refer to
note 3.
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
Advertising costs
Advertising costs are expensed as incurred.
Computation of loss per common share
Basic loss per share is computed by dividing the loss attributable to common
stockholders by the weighted average number of common shares outstanding for
that period. Diluted loss per share is computed giving effect to all dilutive
potential common shares that were outstanding during the period. Dilutive
potential common shares consist of incremental common shares issuable upon
exercise of convertible securities. As at March 31, 1998 and March 31, 1997,
there were no dilutive potential common shares and therefore the dilutive loss
per share is equivalent to the basic loss per share.
Recent pronouncements
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise on Related Information", which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
elected segment information quarterly and to report entity-wide disclosures
about products and services, major customers and major countries in which the
entity holds assets and reports revenues. The Company has not yet evaluated the
effects of this change on its reporting segment information.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Post Retirement Benefits". The Company does not have any such
plans for its employees.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities". The Company does not acquire derivatives or engage in
hedging activities.
<PAGE>
3. SIGNIFICANT CUSTOMER
During 1998, 100% of sales were made to one customer and 100% of accounts
receivable as at December 31, 1997 are due from this one customer.
4. MORTGAGE RECEIVABLE 1998 1997
$ $
Mortgage receivable 162,219 169,188
Valuation allowance (162,219) --
-- 169,188
The Company holds a second mortgage on land and a building. The mortgage is
denominated in C$ and the original terms specified 14% interest on outstanding
balances. During 1998, the debtor defaulted on the mortgage and the Company has
not collected nor recorded interest in the year ended March 31, 1998. As a
result management have determined that a valuation allowance is required to
reflect the possibility that this amount may not be collected.
5. PROPERTY AND EQUIPMENT
Accumulated Net book
Cost depreciation value
$ $ $
1998
Office furniture and equipment 12,744 2,775 9,969
- ---------------------------------------------------------------------
12,744 2,775 9,969
- ---------------------------------------------------------------------
1997
Office furniture and equipment 8,343 1,669 6,674
- ---------------------------------------------------------------------
8,343 1,669 6,674
- ---------------------------------------------------------------------
<PAGE>
6. RELATED PARTY TRANSACTIONS
The amounts due to related parties consist of advances from shareholders acting
as directors and officers. The Company has significant transactions with its
major shareholder Century Capital Management Ltd. involving payment of expenses
in common or on behalf of the Company. As at March 31, 1998 $14,518 [1997 -
$45,607] was outstanding. These amounts are without interest or stated terms of
repayment.
In addition, during the year the Company paid consulting fees of $36,350 [1997 -
$11,500] to shareholders acting as directors and officers.
7. SHARE STOCK
[a] Authorized
Holders of the Common Stock are entitled to one vote per share and to share
equally in any dividends declared and in distributions in liquidation.
[b] Issued
Number
of Shares $
Common stock
AWCL shares March 31, 1996 10 10
Shares issued in reorganization [note 1] 4,999,990 169,189
Shares issued for cash 1,000,000 20,357
Total common stock, March 31, 1997 6,000,000 189,556
Shares issued for cash, net of share issue
costs of $14,340 158,150 246,879
Total common stock, March 31, 1998 6,158,150 436,435
[c]As at March 31, 1998, the Company had received cash in the amount of $500
representing subscriptions received for the issue of 200 common shares. These
shares were issued in fiscal 1999.
[d]Basic and diluted loss per share for the years ended March 31, 1998 and March
31, 1997 are based on the following:
1998 1997
$ $
Net loss for the year 314,303 83,531
Weighted average number of common shares used
in computation 6,079,075 16,438
Basic and diluted loss per share 0.05 5.08
<PAGE>
8. YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
9. COMMITMENT AND CONTINGENCY
The Company signed an agreement on March 31, 1998 for advertisement and
promotional services totaling $400,000. The Company has paid $400,000 with
respect to this agreement between April 1, 1998 and August 31, 1998.
The Company is named as a defendant under a lawsuit launched by the estate of a
former employee. The plaintiff has claimed $500,000 and 87,500 free trading
shares of the Company for settlement of this action. Management believes that
the ultimate resolution of this action will not have a material adverse effect
on the Company's financial condition or results of operations. The Company's
solicitors have indicated that the Company has a meritorious defense to this
claim.
<PAGE>
10. INCOME TAXES
The Company has Canadian non-capital loss carryovers at March 31, 1998 of
approximately $220,000 the benefits of which have not been recognized in the
financial statements. The loss carryovers expire in the years 2004 and 2005.
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The Company has recognized a
valuation allowance equal to the deferred tax assets due to the uncertainty of
realizing the benefits of the assets. Significant components of the Company's
deferred tax assets and liabilities as of March 31 are as follows:
1998 1997
$ $
Deferred tax assets:
Net operating loss carry forwards 99,000 36,000
Depreciation/amortization 1,250 750
Mortgage valuation allowance 76,000 --
Total deferred tax assets 176,250 36,750
Total deferred tax liabilities -- --
Net deferred tax assets 176,250 36,750
Valuation allowance (176,250) (36,750)
Net deferred taxes -- --
<PAGE>
11. SUBSEQUENT EVENTS
[a]From the period April 1, 1998 to August 31, 1998, the Company issued
1,336,144 Common Shares pursuant to private placements for $1,533,838 cash.
[b]Pursuant to a letter of intent signed September 26, 1998, the Company has
agreed to acquire all of the issued and outstanding capital stock of a
company, for consideration of $200,000 cash and the issuance of 400,000
Common Shares in the capital stock of the Company.
In addition, the vendors of the company have agreed to acquire all of the
company share stock from the minority holders thereof and the Company has
agreed that, as part of the compensation to be paid to the minority holders
of the company's shares, to grant to such persons the rights to purchase, in
the aggregate, a total of 100,000 Common Shares of the Company at a price of
$1.00 per share for a term of five years. These rights will vest on the first
anniversary of the Closing Date which is yet to be determined.
<PAGE>
Americlean, Inc.
Consolidated Financial Statements
(United States Dollars)
December 31, 1998 and 1997
Unaudited - Prepared by Management
<PAGE>
Americlean, Inc.
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997 Unaudited - Prepared by Management
ASSETS
1998 1997
$ $
Cash - 1,920
Accounts receivable 9,029 2,112
Due from related parties (note 4) 1,284 3,983
Mortgage receivable - 160,793
Prepaid expenses - 18,177
Total Current Assets 10,313 186,985
Property and equipment [note 2] 51,309 12,365
----------- -----------
61,622 199,350
LIABILITIES AND STOCKHOLDERS EQUITY
Current
Bank indebtedness 6,376 -
Accounts payable 84,144 -
Due to related parties (note 4) 143,037 15,613
Total Liabilities 233,557 15,613
Stockholders' Equity
Share stock [note 3]
Common stock, $0.0001 par value
50,000,000 authorized, 7,094,494
issued outstanding 1,206 614
Preferred stock, $0.0001 par value
5,000,000 authorized, nil issued or
outstanding
Cumulative translation adjustment (55,330) 4,853
Additional paid in capital 1,385,517 403,232
Deficit (1,503,328) (224,962)
total stockholders' equity (171,935) 183,737
-------------- -----------
61,622 199,350
<PAGE>
<TABLE>
Americlean, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
As at December 31, 1998 and 1997 Unaudited - Prepared by Management
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK ADDITIONAL CUMULATIVE
NUMBER PAID-IN TRANSLATION
OF SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT TOTAL
# $ $ $ $ $
Balance March 31,1996 10 10 - - - 10
Issuance of common stock
-for shares and mortgage
receivable 4,999,990 490 168,699 - - 169,189
-for cash 1,000,000 100 20,257 - - 20,357
Unrealized exchange loss - - - (585) - (585)
Loss for the year - - - - (83,531) (83,531)
Balance, March 31,1997 6,000,000 600 188,956 (585) (83,531) 105,440
Issuance of common stock 137,600 14 214,276 - - 214,290
Common stock to be issued - -
Unrealized exchange loss - - - 5,438 5,438
Loss for the 9 months ended - - - - (141,431) (141,431)
Balance, December 31, 1997 6,137,600 614 403,232 4,853 (224,962) 183,737
Issuance of common stock 20,550 2 32,587 - - 32,589
Common stock to be issued - 500 - - - 21,050
Unrealized exchange loss - - - 1,465 - 1,465
Loss for the 3 months ended - - - - (172,872) (172,872)
Balance, March 31,1998 6,158,150 1,116 435,819 6,318 (397,834) 65,969
Issuance of common stock 936,344 90 949,698 - - 949,788
Unrealized exchange loss - - - (61,648) - (61,648)
Loss for the 9 months ended - - - - (1,105,493) (1,105,493)
Balance, December 31, 1998 7,094,494 1,206 1,385,517 (55,330) (1,503,328) (151,385)
</TABLE>
<PAGE>
Americlean, Inc.
CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS
For 9 months ended December 31, 1998 and 1997
Unaudited - Prepared by Management
1998 1997
$ $
Other income 485 -
485 -
Administrative expenses (note 4)
Advertising 238,214 19,753
Bank charges and interest 1,189 4,608
Consulting fees 136,423 10,501
Investor relations 391,658
-
Office and other 62,377 10,364
Professional fees 92,897 20,563
Rent 50,285 7,054
Research and development 16,273 -
Telephone 13,705 9,749
Travel 91,569 7,355
Utilities 1,697 6,578
Wages and benefits 3,049 44,908
Foreign exchange gain/loss 6,640 -
1,105,978 141,431
Loss for the period (1,105,493) (141,431)
Other comprehensive income:
Translation adjustment (61,648) 5,438
Comprehensive loss for the period (1,167,141) (135,993)
Basic and diluted loss per share [note 3 [c]] 0.16 0.02
<PAGE>
Americlean, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For 9 months ended December 31, 1998 and 1997
Unaudited - Prepared by Management
1998 1997
$ $
OPERATING ACTIVITIES
Operating loss for the period (1,105,493) (141,431)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in non-cash working capital:
Accounts receivable 771,748 (2,112)
Mortgage receivable - 8,395
Prepaid expenses - (18,177)
Accounts payable (762,545) (24,815)
Net cash used in opertating activities (1,096,290) (178,140)
INVESTING ACTIVITIES
Acquisition of property and equipment (41,340) (5,691)
Net cash used in investing activities (41,340) (5,691)
FINANCING ACTIVITIES
Proceeds from stock issuance 949,698 214,276
Share subscriptions received 90 14
Advances from (to) related parties 128,518 (29,994
Advances from (to) affiliated company (1,284) (3,983)
Net cash provided by financing activities 1,077,022 180,312
Effect of exchange rate changes on cash (61,648) 5,439
Net increase (decrease) in cash during the
period (122,255) 1,920
Cash, beginning of the period 115,879 -
Cash (bank indebtedness), end of the period $ (6,376) $ 1,920
<PAGE>
Americlean, Inc.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. FINANCING OF OPERATIONS
The Company is in the business of selling laundry and dry cleaning supplies and
equipment to customers in North America. To date, the Company has financed its
cash requirements primarily from share issuances and loans from related parties
The Company's ability to realize the carrying value of its assets is dependent
on successfully establishing its business and achieving future profitable
operations, the outcome of which cannot be predicted at this time. It will be
necessary for the Company to continue to raise additional funds until it is able
to achieve profitable operations.
2. PROPERTY AND EQUIPMENT
Net
Accumulated Book
Cost depreciation Value
$ $ $
December 31, 1998
Office furniture and equipment 53,874 2,565 51,309
53,874 2,565 51,309
December 31, 1997
Office furniture and equipment 12,365 - 12,365
12,365 - 12,365
3. SHARE STOCK
[a] Authorized
Holders of the Common Stock are entitled to one vote per share and to share
equally in any dividends declared and in distributions in liquidation.
<PAGE>
3. SHARE STOCK (cont'd.)
[b] Issued
Number
of Shares $
Common stock
AWCL shares March 31, 1996 10 10
Shares issued in reorganization 4,999,990 169,189
Shares issued for cash 1,000,000 20,357
Total common stock, March 31, 1997 6,000,000 189,556
Shares issued for cash, net of share issue
costs of $14,340 158,150 246,879
Total common stock, March 31, 1998 6,158,150 436,935
Shares issued for cash 936,344 949,788
Total common stock, December 31,1998 7,094,494 1,386,723
[c] Basic and diluted loss per share for the years ended December 31, 1998
and December 31, 1997 are based on the following:
1998 1997
$ $
Loss for the year 1,105,493 141,431
Weighted average number of common shares used
in computation 6,831,114 6,127,165
Basic and diluted loss per share 0.16 .02
4. RELATED PARTY TRANSACTIONS
[a] The amounts due to and from related parties are without interest or
stated terms of repayment.
[b]During the period ended December 31, 1998, the Company was charged $
124,123 (1997 - $ 6,612 ) for consulting, rent and other management and
administrative services provided by a company controlled by a director.
5. CONTINGENCIES
[a]The Company is named as a defendant under a lawsuit launched by the estate
of a former employee. The plaintiff has claimed $500,000 and 87,500 free
trading shares of the Company for settlement of this action. Management
believes that the ultimate resolution of this action will not have a
material adverse effect on the Company's financial condition or results of
operations. The Company's solicitors have indicated that the Company has a
meritorious defense to this claim.
[b]The Company may, from time to time, be subject to claims and legal
proceedings brought against them in the normal course of business. Such
matters are subject to many uncertainties. Management believes that
adequate provisions have been made in the accounts where required and the
ultimate resolution of such contingencies will not have a material adverse
effect on the financial position of the Company.
6. SUBSEQUENT EVENTS
[a]Effective January 7, 1999, the Company consolidated its common shares on
a one new for four old basis.
[b]The Company issued( on a post consolidation basis): 161,447 common shares
in connection with the acquisition of Boggs and Company Inc.(Boggs) and
JKG Group Inc.(JKG), 75,000 common shares for cash of $75,000, 206,507
common shares for settlement of loans payable to related parties of
$206,507 plus an additional 206,507
<PAGE>
6. SUBSEQUENT EVENTS (cont'd.)
common shares for nominal consideration and 3,000,000 common shares
to related parties for services rendered for nominal consideration.
[c]The Company established two stock option plans ( an incentive stock
option plan and a non-qualified stock option plan) for which 500,000
common shares were reserved for issuance. Options were granted to acquire
174,500 common shares at prices ranging from $3.25 to $4.00 and expiring
from April 29,2000 to March 3, 2004.
[d]The Company acquired the assets and liabilities of Boggs and JKG for
$100,000 cash plus common shares at a value of $500,000.
[e]The Company acquired 100% of the outstanding common shares of Universal
EnviroClean Systems, Inc for $180,000 cash.
[f]The Company designated 600 preferred shares as Series A Convertible
Preferred Stock and subsequently issued 600 Series A Convertible Preferred
Stock for cash of $600,000. The preferred shares may be repurchased by the
Company at any time for $1,200 per share and will be converted into common
shares six months after the date of issue or any time prior to that date
at the option of the holder. The preferred shares will also be converted
thirty days after the effective date of a registration statement covering
the common shares to be issued on conversion. The conversion rate is that
number of common shares equal to $1,000 divided by 75% of the average
market price of the Company's common shares for the five days immediately
prior to the conversion date. In connection with the issue of the
preferred shares, the Company paid the agent a commission of $42,000 and
granted the agent warrants to acquire, until February 22, 2000, 42,000
common shares for no additional consideration at the same conversion rate
as the preferred shareholders noted above.
[g]The Company entered into an agreement for investor relations services for
which the fee will be $5,000 per month until July, 1999. In addition, the
Company granted the service provider an option to acquire 100,000 common
shares at $2 per share until January, 2003 and agreed to grant on July 15,
1999 an option to acquire an additional 100,000 common shares on the same
terms.
<PAGE>
Boggs & Company, Inc.
and
JKG Group, Inc.
Combined Financial Statements
Years Ended
September 30, 1998 and 1997
together with
Independent Auditors' Report
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Table of Contents
Independent Auditors' Report 3
Combined Financial Statements:
Balance Sheets 4
Statements of Operations and Retained Earnings (Deficit) 5
Statements of Cash Flows 6
Summary of Significant Accounting Policies 7-8
Notes to Financial Statements 9-15
2
<PAGE>
Independent Auditors' Report
Board of Directors and Shareholders
Boggs & Company, Inc. and JKG Group, Inc.
Charlotte, North Carolina
We have audited the accompanying combined balance sheets of Boggs & Company,
Inc. (a North Carolina corporation) and JKG Group, Inc. (a Florida corporation)
as of September 30, 1998 and 1997, and the related combined statements of
operations and retained earnings, and cash flows for the respective years then
ended. These financial statements are the responsibility of the Companies'
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 financial statements referred to above present fairly, in
all material respects, the financial position of Boggs & Company, Inc. and JKG
Group, Inc. as of September 30, 1998 and 1997, and the results of their combined
operations and their combined cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Companies will continue as going concerns. As discussed in Note 11 to the
financial statements, the Companies have suffered recurring losses from
operations, and have both negative working capital and a net capital deficiency
that raise substantial doubt about their ability to continue as going concerns.
Management's plan in regard to these matters is also described in Note 11. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
December 16, 1998
3
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Combined Balance Sheets
September 30, 1998 1997
Assets
Current:
Cash $ 70,048 $ 16,772
Accounts and note receivable, less allowance for
doubtful accounts of $263,000 and $138,000,
respectively (Note 3) 1,874,173 1,871,607
Inventories (Note 3) 1,802,230 2,260,845
Due from related party (Note 12) -- 71,816
Other 41,026 50,956
Total current assets 3,787,477 4,271,996
Property and equipment (Notes 4 and 5):
Machinery and equipment 277,451 260,830
Transportation equipment 137,776 137,776
Furniture and fixtures 33,422 33,422
Leasehold improvements 137,926 137,926
Assets under capital lease 102,435 102,435
689,010 672,389
Less accumulated depreciation and amortization 417,305
327,038
Net property and equipment 271,705 345,351
Intangible asset (Note 2) 44,633 57,385
--------------------------
$4,103,815 $4,674,732
4
<PAGE>
September 30, 1998 1997
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Checks issued against future deposits $ -- $ 315,769
Notes payable to financial institution (Note 3) 1,782,122
1,934,860
Accounts payable 2,345,765 1,928,338
Accrued expenses 146,688 65,253
Due to related party (Note 12) 71,390 --
Current maturities of long-term debt (Note 4) 48,400 78,330
Current obligations under capitalized leases
(Note 5) 18,776 17,644
Total current liabilities 4,413,141 4,340,194
Long-term debt, less current maturities (Note 4) 117,665 151,201
Obligations under capitalized leases,
less current obligations (Note 5) 30,430 50,794
Total liabilities 4,561,236 4,542,189
Commitments and contingencies (Notes 7 and 11)
Shareholders' equity (deficit):
Common stock (Note 9) 76,200 76,200
Additional paid-in capital 21,262 21,262
Retained earnings (deficit) (554,883) 35,081
Total shareholders' equity (deficit) (457,421) 132,543
$4,103,815 $4,674,732
See accompanying summary of significant accounting policies and notes to
combined financial statements.
4 (cont'd)
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Combined Statements of Operations and Retained Earnings (Deficit)
Year Ended September 30, 1998 1997
Sales $ 13,926,182 $15,094,518
Cost of products sold 10,306,873 11,664,193
Gross margin 3,619,309 3,430,325
Selling, general and administrative expenses 4,008,913 3,716,091
Operating loss (389,604) (285,766)
Nonoperating expense (income):
Interest expense 264,802 225,728
Interest income (54,846) (78,814)
Other items (9,596) --
Unusual items (Note 10) -- 131,705
Total nonoperating expense 200,360 278,619
Loss before income taxes (589,964) (564,385)
Income tax expense (Note 6) -- 31,267
Net loss (589,964) (595,652)
Retained earnings, beginning of year 35,081 630,733
Retained earnings (deficit), end of year $ (554,883)$ 35,081
See accompanying summary of significant accounting policies and notes to
combined financial statements.
5
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Statements of Cash Flows
Year Ended September 30, 1998 1997
Cash flows from operating activities:
Net loss $ (589,964) $ (595,652)
Adjustments of net loss to net cash
provided by operating activities:
Depreciation and amortization 103,019 78,302
Deferred income tax provision -- 31,267
Provision for allowance for doubtful accounts 125,000 76,000
Gain on the sale of fixed assets -- 3,657
(Increase) decrease in:
Accounts and notes receivable (127,566) (2,733)
Inventories 458,615 (172,473)
Other current assets 9,930 15,578
Increase (decrease) in:
Checks issued against future deposits (315,769) (54,482)
Accounts payable 417,427 503,536
Accrued expenses 81,435 46,378
Net cash used in operating activities 162,127 (70,622)
Cash flows from investing activities:
Purchases of property and equipment (16,621) (49,434)
Proceeds from sale of property and equipment -- 7,875
Net cash paid for acquired business and
intangible asset (Note 13) -- (207,240)
Loans (to) from related party 143,206 (71,816)
Net cash used in investing activities 126,585 (320,615)
Cash flows from financing activities:
Net proceeds (payments) on notes payable to
financial institution (152,738) 448,093
Payments on long-term debt (63,466) (31,225)
Payments on capital leases (19,232) (19,633)
Net cash provided by financing activities (235,436) 397,235
Net increase in cash 53,276 5,998
Cash, beginning of year 16,772 10,774
Cash, end of year $ 70,048 16,772
See accompanying summary of significant accounting policies and notes to
combined financial statements.
6
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Summary of Significant Accounting Policies
Business and Credit
Concentration Boggs & Company, Inc. and JKG Group, Inc.
(the Company) sell supplies and equipment
to entities engaged in laundry and dry
cleaning activities and install, service
and repair equipment used in these
activities.
One of the Company's major suppliers accounts for 10-15
percent of purchases.
The Company's customers are concentrated in the
southeastern region of the United States. No single
customer accounted for a significant portion of the
Company's sales or accounts receivable as of September
30, 1998 or 1997. The Company reviews a customer's
credit history before extending credit. An allowance for
doubtful accounts is established based upon factors
surrounding the credit risk of specific customers,
historical trends and other information. To reduce
credit risk, the Company generally requires a down
payment on large equipment orders.
Inventories Inventories are valued at the
lower-of-cost or market, cost being
determined on the first-in, first-out
(FIFO) method.
Property and Equipment
and Depreciation Property and equipment are stated at cost.
Depreciation for financial statements and income tax
purposes is principally computed using accelerated
methods over the estimated useful life of the respective
assets.
Income Taxes Income taxes are calculated using the
liability method specified by Statement
of Financial Accounting Standards No.
109, "Accounting for Income Taxes."
Estimates The preparation of financial statements
in conformity with generally accepted
accounting principles requires management
to make estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during
the reported period. Actual results
could differ from those estimates.
Advertising Cost incurred for producing and
communicating advertising are expensed
when incurred.
7
<PAGE>
Principles of
Combination In December 1996, JKG Group, Inc. was formed for the
purpose of acquiring the operations of Cleaners
Equipment Corporation (a Florida corporation) located in
St. Petersburg, Florida. The acquisition was effective
March 31, 1997 as more fully described in Note 1.
Although, JKG Group, Inc.'s ownership is different than
Boggs & Company, Inc., 70% of the ownership is the same
as Boggs & Company, Inc. and the Companies are
controlled by the same management.
8
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
1. Business Acquisition Effective March 31, 1997, JKG Group, Inc.
purchased the operations of Cleaners
Equipment Corporation (the "Business")
located in St. Petersburg, Florida. The
Business was engaged in the sale of
laundry and dry cleaning equipment and
installed, serviced and repaired
equipment used in those activities.
The purchase price included $143,479 of cash, interest
bearing notes (Note 4) totaling $221,977, and $63,761 of
expenses incurred in connection with the acquisition.
The acquisition has been accounted for by the purchase
method of accounting, and accordingly, the purchase
price has been allocated to assets acquired based on the
estimated fair values at the date of acquisition. In
addition, the results of operations of the business are
included in the financial statements since the date of
acquisition. The estimated fair values of assets
acquired are summarized as follows:
Fixed assets $ 78,498
Inventories $286,958
Funds for payment of the purchase price were obtained
through loans from Boggs & Company, Inc., borrowings
under the revolving credit agreement (Note 3), issuance
of debt to a related party and
an assumption of debt.
2. Intangible Asset Intangible asset is summarized as follows:
September 30, 1998 1997
Excess of acquisition costs over fair
value of net assets acquired $ 63,761 $ 63,761
Accumulated amortization (19,128) (6,376)
$ 44,633 $ 57,385
3. Notes Payable to
Financial Institution The Companies have revolving credit
agreements with a financial institution
through May 1998 and continuing on a
year-to-year basis thereafter. The
agreements may be terminated by either
party by giving proper notification.
Advances under these arrangements bear
interest at the financial institution's
prime rate (8.25 percent at September 30,
1998) plus 2.0 percent, but not less than
8 percent.
9
<PAGE>
Borrowings may not exceed $3,000,000 and are limited to a percentage of
qualified accounts receivable and inventories. The agreements require a
minimum loan balance of $600,000. These agreements are collateralized by
accounts receivable and inventories. Each of the Companies' 20% or more
shareholders have personally guaranteed up to $250,000 of the advances.
4. Long-Term Debt Long-term debt is as follows:
September 30, 1998 1997
Notes payable to financial
institutions, due in various
monthly installments through
December 1999, including
interest ranging from 8.8% to
11.5% $ 17,327 $ 55,340
Notes payable to related party,
due in various monthly
installments through March 2002
including interest at 8%(Note 1) 148,738 174,191
Current maturities (48,400) (78,330)
$ 117,665 $ 151,201
Equipment and vehicles with a net book value of $64,000 are pledged
as collateral on the above notes payable. In addition, the notes
payable to related party is collateralized by certain accounts
receivable and inventories; and is subordinated to the revolving
credit agreement (Note 3).
The aggregate annual maturities of long-term debt are as
follows:
September 30,
1999 $ 48,400
2000 37,376
2001 38,544
2002 41,745
Total 166,065
10
<PAGE>
5. Lease Obligations The Companies lease certain real estate
and automotive equipment used in their
operations. The automotive leases
include provisions for operating and
maintenance expenses to be provided by
the lessor. In addition, the automotive
leases contain provisions for contingent
rental payments based on miles traveled.
The Companies lease their Charlotte and
St. Petersburg offices from their
shareholders. The leases are accounted
for as operating leases. The Company
rents the Charlotte facility on a
month-to-month basis for $4,700 a month;
and rents the St. Petersburg facility
under a lease agreement for $3,500 a
month. The St. Petersburg lease
agreement's initial term expires
March 31, 2002, with two 10 year renewal
options. The leases provide for the
payment of real estate taxes and other
related expenses.
Certain transportation, office, and computer equipment
are leased under capital leases with imputed interest
rates varying from 9 percent to 11 percent.
Future minimum rental payments under non-cancelable
leases at September 30, 1998, are as follows:
Fiscal Year Ending Operating Capitalized
Leases Leases
1999 $ 148,158 $ 22,744
2000 147,275 19,778
2001 136,366 13,098
2002 100,783 300
2003 74,200 --
Thereafter 62,300 --
Total $ 669,082 55,920
Less imputed interest 6,714
Obligations under capitalized
leases $ 49,206
Rental expenses relating to the above operating leases
(including related parties) for the years ended
September 30, 1998 and 1997, approximated $273,000 and
$256,000, respectively.
11
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
6.Income Taxes Income tax expense, in the statement of operations,
is made up of the following components:
Year Ended September 30, 1998 1997
Current $ -- $ --
Deferred 31,267
$ -- $ 31,267
The differences between book and taxable income are
generated principally from bad debt reserves and
inventory costs.
Deferred tax assets are comprised of the following:
September 30, 1998 1997
Inventory costs 9,000 9,000
Bad debt reserves 67,000 31,000
Loss carry forwards 361,000 160,000
Gross deferred tax assets 437,000 200,000
Deferred tax assets valuation
allowance (437,000) (200,000)
$ - $ --
The changes in the valuation allowance for deferred tax
assets were due to the substantial losses incurred in
1998 and 1997. Approximately $1,000,000 of Boggs &
Company, Inc.'s loss carry-forwards remain at September
30, 1998. Their use is limited to future taxable
earnings of Boggs & Company, Inc. The carry-forwards
expire in varying amounts through 2013.
JKG Group, Inc. has elected to be taxed
under Subchapter S of the Internal
Revenue Code. Accordingly, 1998 and 1997
operations of the Company, were reported
to the shareholders who are responsible
for payment of taxes, as applicable.
12
<PAGE>
7. Commitments and
Contingencies In October 1990, the Division of
Environmental Management (DEM) of the
North Carolina Department of Environment,
Health and Natural Resources issued a
Notice of Violation to the Company. The
notice identified the Company as a
potentially responsible party, following
DEM's earlier inspection of the Charlotte
facilities, which are leased by the
Company from its shareholders. The
Company responded to the notice and
retained consultants to conduct a
preliminary assessment of the soil and
groundwater. The preliminary results
were presented to DEM at a meeting in
December 1990 and based on these
preliminary findings, a second Notice of
Violation was issued by DEM. The Company
has undertaken soil remediation but a
full ground water assessment has not been
completed. As of December 1998, no fines
or penalties have been assessed by DEM,
and the Company has complied with all
violation notices. Neither the Company
nor its consultants are able to estimate
either the necessity or costs of any
further remediation efforts. Since a
full site assessment study has not been
completed, management is unable to
determine the Company's ultimate
liability, if any.
The Company is subject to legal proceedings and claims
which arise in the ordinary course of its business. In
the opinion of management, the amount of ultimate
liability with respect to these actions will not
materially affect the financial position of the Company.
8. Profit Sharing Plan The Company maintains a profit sharing plan for all
eligible employees. The plan qualifies under Internal
Revenue Code Section 401(k). Contributions by the
Company are discretionary.
Contributions in the amounts of $7,200 and $0 were made
during the fiscal years ended September 30, 1998 and
1997, respectfully.
13
<PAGE>
9. Common Stock Boggs & Company, Inc. and JKG Group, Inc.
are related through substantially common ownership. The
common stock accounts consists of the following:
Boggs & Company, Inc.
$100 par value;
5,000 shares authorized;
762 shares issued and
outstanding $ 76,200
JKG Group, Inc.
$1 par value;
1,000 shares authorized;
1,000 shares issued and
outstanding 1,000
Amount receivable from shareholders
of JKG Group, Inc. for purchase of
issued shares(1,000) 76,200
10.Unusual items During the year ended September 30, 1997, Boggs &
Company, Inc. recorded
unusual expenses of $113,705, before
taxes. This is presented separately as a
component of non-operating expense in the
Combined Statement of Operations. The
charges related to $115,985 incurred in
connection with settlement of litigation
surrounding a non-compete claim by a
competitor; and, $15,720 incurred in
connection with settlement of litigation
filed by neighboring property owners in
connection with alleged contamination of
their soil by chemicals previously sold
by Boggs & Company, Inc.
11.Liquidit The accompanying combined financial statements have been
prepared assuming that the Companies will continue as
going concerns. The Companies have experienced
significant losses in 1998 and 1997 and
show negative working capital and
negative net worth as of September 30, 1998. Such
matters raise substantial doubt about the Companies'
ability to continue as going concerns. Subsequent to
September 1998, the Companies entered into negotiations
with a publically held company to dispose of all assets
and liabilities.
14
<PAGE>
The accompanying financial statements do not include any
adjustments relating to the reasonability and
classification of reported asset amounts or the amounts
and classification of liabilities that might be
necessary should the Companies be unable to continue as
a going concern.
12. Due from/to
Related Party The due from/to related party reflects amounts
advanced from/to a minority shareholder of JKG Group,
Inc. Such amount bears no interest and there are no
written repayment terms.
13.Supplemental Cash Year Ended September 30, 1998 1997
Flow Information Interest paid $ 267,091 214,819
Non-cash investing and financing activity:
Cash flow information related to the 1997 business
acquisition discussed in Note 1 is as follows:
Fair value of current assets acquired $286,958
Fair value of non-current assets
acquired, excluding intangible
assets 78,498
Intangible assets 63,761
Liabilities assumed and created (221,977)
Net cash paid for acquired business and
intangible asset $207,240
Capital lease obligations of $64,855 were incurred in
1997 when the Companies entered into leases for new
equipment.
14.Reclassifications Certain 1997 items have been reclassified to
conform with 1998 presentation.
15
<PAGE>
Boggs & Company, Inc.
and
JKG Group, Inc.
Combined Financial Statements
Three Months Ended
December 31, 1998 and 1997
together with
Independent Accountants' Compilation Report
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Table of Contents
Independent Accountants' Compilation Report 3
Combined Financial Statements:
Balance Sheets 4
Statements of Operations and Retained Earnings (Deficit) 5
Statements of Cash Flows 6
Summary of Significant Accounting Policies 7-8
Notes to Financial Statements 9-15
<PAGE>
Independent Accountants' Compilation Report
Board of Directors and Shareholders
Boggs & Company, Inc. and JKG Group, Inc.
Charlotte, North Carolina
We have compiled the accompanying combined balance sheets of Boggs & Company,
Inc. (a North Carolina corporation) and JKG Group, Inc. (a Florida corporation)
as of December 31, 1998 and 1997, and the related statements of operations and
retained earnings (deficit) and cash flows for the respective three months then
ended, in accordance with the Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
The accompanying financial statements have been prepared assuming that the
Companies will continue as going concerns. As discussed in Note 10 to the
financial statements, the Companies have suffered recurring losses from
operations, and have both negative working capital and a net capital deficiency
that raise substantial doubt about their ability to continue as going concerns.
Management's plan in regard to these matters is also described in Note 10. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
[GRAPHIC OMITTED]
January 23, 1999
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Combined Balance Sheets
December 31, 1998 1997
Assets
Current:
Cash $ 37,553 $ 13,313
Accounts and note receivable, less allowance for
doubtful accounts of $274,000 and $261,000,
respectively (Note 3) 1,560,696 2,004,349
Inventories (Note 3) 1,902,210 2,136,269
Due from related party (Note 11) - 71,816
Other 79,410 52,785
Total current assets 3,579,869 4,278,532
Property and equipment (Notes 4 and 5):
Machinery and equipment 277,451 266,290
Transportation equipment 137,776 137,776
Furniture and fixtures 33,422 33,554
Leasehold improvements 137,926 137,926
Assets under capital lease 102,435 102,435
689,010 677,981
Less accumulated depreciation and amortization 438,912 357,679
Net property and equipment 250,098 320,302
Intangible asset (Note 2) 41,444 54,197
$ 3,871,411 4,653,031
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Combined Statements of Operations and Retained Earnings (Deficit)
Three Months Ended December 31, 1998 1997
Sales $ 3,084,570 $ 3,424,617
Cost of products sold 2,296,003 2,625,416
Gross margin 788,567 799,201
Selling, general and administrative expenses 857,801 1,020,803
Operating loss (69,234) (221,602)
Nonoperating expense (income):
Interest expense 54,097 70,174
Interest income (15,886) (23,227)
Other items (1,885) -
Total nonoperating expense 36,326 46,947
Loss before income taxes (105,560) (268,549)
Income tax expense (Note 6) - -
Net loss (105,560) (268,549)
Retained earnings (deficit), beginning of period (554,883) 35,081
Retained earnings (deficit), end of period (660,443)$ (233,468)
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Statements of Cash Flows
Three Months Ended December 31, 1998 1997
Cash flows from operating activities:
Net loss $ (105,560) $ (268,549)
Adjustments of net loss to net cash
provided by operating activities:
Depreciation and amortization 24,796 33,829
Provision for allowance for doubtful accounts 11,000
123,000
(Increase) decrease in:
Accounts and notes receivable 302,477 (255,742)
Inventories (99,980) 124,576
Other current assets (38,384) (1,829)
Increase (decrease) in:
Checks issued against future deposits 81,445 16,278
Accounts payable 33,568 255,155
Accrued expenses (40,532) 29,541
Net cash provided by operating activities 168,830 56,259
Cash flows used in investing activities:
Purchases of property and equipment - (5,592)
Cash flows from financing activities:
Net payments on notes payable to
financial institution (192,412) (16,490)
Payments on long-term debt (5,937) (31,825)
Payments on capital leases (2,976) (5,811)
Net cash used in financing activities (201,325) (54,126)
Net decrease in cash (32,495) (3,459)
Cash, beginning of period 70,048 16,772
Cash, end of period $ 37,553 $ 13,313
See accompanying independent accountants' compilation report.
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Summary of Significant Accounting Policies
Business and Credit
Concentration Boggs & Company, Inc. and JKG Group, Inc. (the
Company) sell supplies and equipment to entities
engaged in laundry and dry cleaning activities and
install, service and repair equipment used in these
activities.
One of the Company's major suppliers accounts for 10-15
percent of purchases.
The Company's customers are concentrated in the
southeastern region of the United States. No single
customer accounted for a significant portion of the
Company's sales or accounts receivable as of December
31, 1998 or 1997. The Company reviews a customer's
credit history before extending credit. An allowance for
doubtful accounts is established based upon factors
surrounding the credit risk of specific customers,
historical trends and other information. To reduce
credit risk, the Company generally requires a down
payment on large equipment orders.
Inventories Inventories are valued at the lower-of-cost or
market, cost being determined on the first-in,
first-out (FIFO) method.
Property and Equipment
and Depreciation Property and equipment are stated at cost.
Depreciation for financial statements and income tax
purposes is principally computed using accelerated
methods over the estimated useful life of the respective
assets.
Income Taxes Income taxes are calculated using the liability
method specified by Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
Estimates The preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements
and the reported amounts of revenues and expenses
during the reported period. Actual results could
differ from those estimates.
Advertising Cost incurred for producing and communicating
advertising are expensed when incurred.
<PAGE>
Principles of
Combination In December 1996, JKG Group, Inc. was formed for the
purpose of acquiring the operations
of Cleaners Equipment Corporation (a Florida
corporation) located in St. Petersburg, Florida. The
acquisition was effective March 31, 1997 as more
fully described in Note 1.
Although, JKG Group, Inc.'s ownership is different than
Boggs & Company, Inc., 70% of the ownership is the same
as Boggs & Company, Inc. and the Companies are
controlled by the same management.
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
1 Business Acquisition Effective March 31, 1997, JKG
Group, Inc. purchased the operations of Cleaners
Equipment Corporation (the "Business") located in St.
Petersburg, Florida. The Business was engaged in the
sale of laundry and dry cleaning equipment and
installed, serviced and repaired equipment used in those
activities.
The purchase price included $143,479 of cash, interest
bearing notes (Note 4) totaling $221,977, and $63,761 of
expenses incurred in connection with the acquisition.
The acquisition has been accounted for by the purchase
method of accounting, and accordingly, the purchase
price has been allocated to assets acquired based on the
estimated fair values at the date of acquisition. In
addition, the results of operations of the business are
included in the financial statements since the date of
acquisition. The estimated fair values of assets
acquired are summarized as follows:
Fixed assets $ 78,498
Inventories $ 286,958
Funds for payment of the purchase price were obtained
through loans from Boggs & Company, Inc., borrowings
under the revolving credit agreement (Note 3), issuance
of debt to a related party and an assumption of debt.
2. Intangible Asset Intangible asset is summarized as follows:
December 31, 1998 1997
Excess of acquisition costs over
fair value of net assets acquired $ 63,761 $ 63,761
Accumulated amortization (22,317) (9,564)
$ 41,444 $ 54,197
3. Notes Payable to
Financial Institution The Companies have revolving credit
agreements with a financial institution through May 1999
and continuing on a year-to-year basis thereafter. The
agreements may be terminated by either party by giving
proper notification. Advances under these arrangements
bear interest at the financial institution's prime rate
(7.75 percent at December 31, 1998) plus 2.0 percent,
but not less than 8 percent.
<PAGE>
Borrowings may not exceed $3,000,000 and are limited to
a percentage of qualified accounts receivable and
inventories. The agreements require a minimum loan
balance of $600,000. These agreements are collateralized
by accounts receivable and inventories. Each of the
Companies' 20% or more shareholders have personally
guaranteed up to $250,000 of the advances.
4. Long-Term Debt Long-term debt is as follows:
December 31, 1998 1997
Notes payable to financial
institutions, due in various
monthly installments through
December 1999, including
interest ranging from 8.8% to
11.5% $ 11,390 $ 41,154
Notes payable to related party, due
in various monthly installments
through March 2002 including
interest at 8% (Note 1) 148,738 156,552
Current maturities (48,400)
(78,330)
$ 111,728 $ 119,376
Equipment and vehicles with a net book value of $64,000
are pledged as collateral on the above notes payable. In
addition, the notes payable to related party is
collateralized by certain accounts receivable and
inventories; and is subordinated to the revolving credit
agreement (Note 3).
The aggregate annual maturities of long-term debt are as
follows:
December 31,
1999 $ 48,400
2000 37,376
2001 38,544
2002 35,808
Total $ 160,128
<PAGE>
5.Lease Obligations The Companies lease certain real
estate and automotive equipment used in their
operations. The automotive leases include provisions for
operating and maintenance expenses to be provided by the
lessor. In addition, the automotive leases contain
provisions for contingent rental payments based on miles
traveled.
The Companies lease their Charlotte and St. Petersburg
offices from their shareholders. The leases are
accounted for as operating leases. The Company rents the
Charlotte facility on a month-to-month basis for $4,700
a month; and rents the St. Petersburg facility under a
lease agreement for $3,500 a month. The St. Petersburg
lease agreement's initial term expires March 31, 2002,
with two 10 year renewal options. The leases provide for
the payment of real estate taxes and other related
expenses.
Certain transportation, office, and computer equipment
are leased under capital leases with imputed interest
rates varying from 9 percent to 11 percent.
Future minimum rental payments under non-cancelable
leases at December 31, 1998, are as follows:
Calendar Year Ending Operating Capitalized
Leases Leases
1999 $ 148,158 $ 22,744
2000 147,275 17,582
2001 136,366 9,909
2002 100,783 --
2003 74,200 --
Thereafter 62,300 --
Total $ 669,082 50,235
Less imputed interest 4,005
Obligations under capitalized
leases $ 46,230
Rental expenses relating to the above operating leases
(including related parties) for the three months ended
December 31, 1998 and 1997, approximated $68,000 and
$67,000, respectively.
<PAGE>
Boggs & Company, Inc. and JKG Group, Inc.
Notes to Combined Financial Statements
6. Income Taxes Income tax expense, in the statement of
operations, is made up of the following components:
Year Ended December 31, 1998 1997
Current $ - $ -
Deferred - -
$ - $ -
The differences between book and taxable income are
generated principally from bad debt reserves and
inventory costs.
Deferred tax assets are comprised of the following:
December 31, 1998 1997
Inventory costs $ 9,000 $ 9,000
Bad debt reserves 67,000 31,000
Loss carryforwards 361,000 160,000
Gross deferred tax assets 437,000 200,000
Deferred tax assets valuation
allowance (437,000) (200,000)
$ -- $ --
The changes in the valuation allowance for deferred tax
assets were due to the substantial losses incurred in
1998 and 1997. Approximately $1,100,000 of Boggs &
Company, Inc.'s loss carryforwards remain at December
31, 1998. Their use is limited to future taxable
earnings of Boggs & Company, Inc. The carryforwards
expire in varying amounts through 2014.
JKG Group, Inc. has elected to be taxed under
Subchapter S of the Internal Revenue Code.
Accordingly, 1998 and 1997 operations of the Company,
were reported to the shareholders who are responsible
for payment of taxes, as applicable.
<PAGE>
7. Commitments and
Contingencies In October 1990, the Division of Environmental
Management (DEM) of the North Carolina Department of
Environment, Health and Natural Resources issued a
Notice of Violation to the Company. The notice
identified the Company as a potentially responsible
party, following DEM's earlier inspection of the
Charlotte facilities, which are leased by the Company
from its shareholders. The Company responded to the
notice and retained consultants to conduct a
preliminary assessment of the soil and groundwater.
The preliminary results were presented to DEM at a
meeting in December 1990 and based on these
preliminary findings, a second Notice of Violation
was issued by DEM. The Company has undertaken soil
remediation but a full ground water assessment has
not been completed. As of December 1998, no fines or
penalties have been assessed by DEM, and the Company
has complied with all violation notices. Neither the
Company nor its consultants are able to estimate
either the necessity or costs of any further
remediation efforts. Since a full site assessment
study has not been completed, management is unable to
determine the Company's ultimate liability, if any.
The Company is subject to legal proceedings and claims
which arise in the ordinary course of its business. In
the opinion of management, the amount of ultimate
liability with respect to these actions will not
materially affect the financial position of the Company.
8. Profit Sharing Plan The Company maintains a profit
sharing plan for all eligible employees. The plan
qualifies under Internal Revenue Code Section 401(k).
Contributions by the Company are discretionary.
No contributions were made during the quarters ended
December 31, 1998 or 1997.
<PAGE>
9.Common Stock Boggs & Company, Inc. and JKG Group, Inc.
are related through substantially common ownership. The
common stock accounts consists of the following:
Boggs & Company, Inc.
$100 par value;
5,000 shares authorized;
762 shares issued and
outstanding $ 76,200
JKG Group, Inc.
$1 par value;
1,000 shares authorized;
1,000 shares issued and
outstanding 1,000
Amount receivable from shareholders
of JKG Group, Inc. for purchase of
issued shares (1,000)
$ 76,200
10.Liquidit The accompanying combined financial statements have been
prepared assuming that
the Companies will continue as going concerns. The
Companies have experienced significant losses in 1998
and 1997 and show negative working capital and
negative net worth as of December 31, 1998. Such
matters raise substantial doubt about the Companies'
ability to continue as going concerns. During
October 1998, the Companies entered into negotiations
with a publicly held company to dispose of all of the
companies' assets and liabilities.
The accompanying financial statements do not include any
adjustments relating to the reasonability and
classification of reported asset amounts or the amounts
and classification of liabilities that might be
necessary should the Companies be unable to continue as
a going concern.
<PAGE>
11.Due from/to
Related Party The due from/to related party reflects amounts
advanced from/to a minority shareholder of JKG Group,
Inc. Such amount bears no interest and there are no
written repayment terms.
12.Supplemental Cash Quarter Ended December 31, 1998 1997
Flow Information
Interest paid $ 52,981 70,322
Non-cash investing and financing activity:
Cash flow information related to the 1997 business
acquisition discussed in Note 1 is as follows:
Fair value of current assets acquired $ 286,958
Fair value of non-current assets
acquired, excluding intangible
assets 78,498
Intangible assets 63,761
Liabilities assumed and created (221,977)
Net cash paid for acquired business and
intangible asset $ 207,240
Capital lease obligations of $64,855 were incurred in
1997 when the Companies entered into leases for new
equipment.
<PAGE>
Americlean, Inc.
PRO FORMA COMBINED BALANCE SHEETS
[See Basis of Presentation - Note 1]
As at December 31, 1998 Unaudited -
Prepared by Management
Pro forma
Americlean,. Boggs & Acquisition Combined
Inc. Company, Inc. Adjustments
and JKG [Note 2]
Group, Inc.
$ $ $ $
ASSETS
Current
Cash - 37,553 100,000 (a) 37,553
(100,000)(b)
Accounts receivable 9,029 1,560,696 1,569,725
Inventories - 1,902,210 1,902,210
Other 1,284 79,410 80,694
- ------------------------------------------------------------------------------
Total current assets 10,313 3,579,869 3,590,182
- ------------------------------------------------------------------------------
Property and equipment 51,309 250,098 301,407
Goodwill 41,444 100,000 (b) 1,204,425
500,000 (c)
562,981 (d)
61,622 3,871,411 1,162,981 5,096,014
==============================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current
Bank indebtedness 6,376 - 6,376
Notes payable to financial
institution - 1,589,710 1,589,710
Accounts payable and accrue
expenses 84,144 2,566,934 2,651,078
Due to related parties 143,036 71,390 100,000 (a) 314,426
Current maturities of long
term debt - 48,400 48,400
Current obligations under
capital leases - 18,776 18,776
Total current liabilities 233,556 4,295,210 100,000 4,628,766
Long term debt, less current
maturities - 111,728 111,728
Capital leases, less current
maturities - 27,454 27,454
Total liabilities 233,556 4,434,392 100,000 4,667,948
Stockholders' equity
Share stock
Common stock 1,206 76,200 50 (c) 1,266
(76,200)(d)
Additional paid-in capital 1,385,517 21,262 499,950 (c) 1,885,467
(21,262)(d)
Cumulative translation
adjustment (55,330) (55,330)
Retained earnings (deficit) (1,503,327) (660,443) 660,443 (d)(1,503,327)
- -------------------------------------------------------------------------------
Total stockholders' equity (171,934) (562,981) 1,062,981 428,066
61,622 3,871,411 1,162,981 5,096,014
See accompanying notes
<PAGE>
Americlean, Inc.
PRO FORMA COMBINED STATEMENTS OF LOSS
[See Basis of Presentation - Note 1]
For 9 months ended December 31, 1998 Unaudited -
Prepared by Management
Pro forma
Americlean, Boggs & Acquisition Combined
Inc. Company, Inc. Adjustments
and JKG [Note 2]
Group, Inc.
$ $ $ $
Sales 10,456,481 10,456,481
Cost of Sales 7,991,365 7,991,365
- -------------------------------------------------------------------------------
Gross profit 2,465,116 2,465,116
Other income 485 38,749 39,234
- -------------------------------------------------------------------------------
485 2,503,865 2,504,350
- -------------------------------------------------------------------------------
Administrative and Selling Expenses
Advertising and promotion 238,215 15,636 253,851
Bank charges and interest 1,189 185,257 186,446
Consulting fees 136,423 136,423
Depreciation 45,166 (e) 45,166
Investor relations 391,658 391,658
Office and other 62,377 638,321 700,698
Professional fees 92,897 160,153 253,050
Rent 50,285 213,091 263,376
Research and development 16,273 16,273
Telephone 13,705 78,662 92,367
Travel 91,569 212,873 304,442
Utilities 1,697 22,897 24,594
Wages and employee benefits 3,049 1,515,284 1,518,333
Foreign exchange gain/loss 6,641 6,641
- -------------------------------------------------------------------------------
1,105,978 3,042,174 45,166 4,193,318
- -------------------------------------------------------------------------------
Net loss for the year (1,105,493) (538,309) (45,166) (1,688,968)
Other comprehensive income:
Translation adjustment (61,648) - (61,648)
- -------------------------------------------------------------------------------
Comprehensive loss for the
year (1,167,141) (538,309) (45,166) (1,750,616)
- -------------------------------------------------------------------------------
Basic and diluted loss per share
[Note 3] 0.16 0.23
- -------------------------------------------------------------------------------
See accompanying notes
<PAGE>
Americlean, Inc.
PRO FORMA COMBINED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS
[See Basis of Presentation - Note 1]
For 12 months ended March 31, 1998 Unaudited -
Prepared by Management
Pro forma
Americlean Boggs & Acquisition Combined
Inc. Company, Inc. Adjustments
and JKG [Note 2]
Group, Inc.
$ $ $ $
Sales 1,111,374 15,003,445 16,114,819
Cost of Sales 1,020,931 11,522,952 12,543,883
Gross profit 90,443 3,480,493 3,570,936
Other income - 68,927 68,927
90,443 3,549,420 3,639,863
Administrative and selling expenses
Advertising and promotion 47,450 28,696 76,146
Automobile 573 573
Bad debts 4,992 4,992
Bank charges and interest 2,005 263,935 265,940
Consulting fees 41,245 41,245
Depreciation 1,995 60,221(e) 62,216
Loss on disposition of equipment 3,228 3,228
Office and other 6,764 1,063,663 1,070,427
Professional fees 26,801 134,238 161,039
Rent 9,270 259,055 268,325
Telephone and fax 13,880 111,192 125,072
Travel 18,779 269,331 288,110
Utilities 9,439 32,139 41,578
Valuation allowance on
Mortgage receivable 164,013 164,013
Wages and employee benefits 54,312 2,167,623 2,221,935
404,746 4,329,872 60,221 4,794,839
Net loss for the year (314,303) (780,452) (60,221) (1,154,976)
Other comprehensive income:
Translation adjustment 6,903 - 6,903
Comprehensive loss for the year (307,400) (780,452) (60,221) (1,148,073)
Basic and diluted loss per
share [Note 3] 0.05 0.17
See accompanying notes
<PAGE>
Americlean, Inc.
NOTES TO THE UNAUDITED PRO FORMA
FINANCIAL STATEMENTS
December 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma financial statements of Americlean, Inc.
(Americlean) have been prepared by management in accordance with accounting
principles generally accepted in the United States. They have been prepared from
information derived from the following statements:
Audited Americlean financial statements as at and for the year ended
March 31,1998
Unaudited Americlean financial statements as at and for the 9 months
ended December 31, 1998.
Unaudited combined Boggs and Company, Inc.(Boggs) and JKG Group,Inc.
(JKG) financial statements as at and for the 3 months ended December
31, 1998.
Unaudited combined Boggs and JKG income statement for the 9 month
period April 1, 1998 to December 31,1998 and the 12 month period April
1, 1997 to March 31, 1998.
Unaudited combined Boggs and JKG income statement for the 12 month
period April 1, 1997 to March 31, 1998.
Together with other information available to Americlean.
The unaudited pro forma financial statements should be read in conjunction with
the unaudited financial statements of Americlean and the combined financial
statements of Boggs and JKG referred to above. These unaudited pro forma
financial statements are not necessarily indicative of the financial
position which would have resulted if the combination and reorganization
had actually occurred on March 31, 1997, March 31, 1998 or December 31, 1998.
2. PRO FORMA ADJUSTMENTS WITH RESPECT TO THE
REORGANIZATION AND BUSINESS COMBINATION
Americlean was incorporated on March 3, 1997 in Delaware. The Company is engaged
in the business of recycling and selling dry cleaning products to North American
markets.
Boggs and Company (1998), Inc. (Boggs 1998) was incorporated on November 25,
1998 in North Carolina. The Company was incorporated for the purpose of
purchasing the assets and liabilities of Boggs and JKG.
Boggs and JKG sell supplies and equipment to entities engaged in laundry and dry
cleaning activities and install, service and repair equipment used in these
activities.
The unaudited pro forma Americlean financial statements give effect to the
proposed major transaction of Boggs 1998 acquiring all of the assets and
liabilities of Boggs and JKG, as if it had occurred as at December 31, 1998.
The unaudited pro forma balance sheet includes pro forma adjustments reflecting
the following transactions:
(a) Americlean receives a $100,000 loan from a related party.
(b) Americlean pays the vendors $100,000 in cash for the assets and
liabilities of Boggs and JKG.
(c) Americlean pays the vendors the equivalent of $500,000 in Americlean,
Inc. common stock for the assets and liabilities of Boggs and JKG.
(d) Boggs 1998 purchases the assets and liabilities of Boggs and JKG.
(e) Amortization of goodwill on a straight-line basis over 20 years.
<PAGE>
Americlean, Inc.
NOTES TO THE MANAGEMENT PREPARED
PRO FORMA BALANCE SHEET
December 31, 1998
2. PRO FORMA ADJUSTMENTS WITH RESPECT TO THE
REORGANIZATION AND BUSINESS COMBINATION (continued)
The value of assets andliabilities acquired based on consideration of $600,000
are as follows:
Cash $ 37,553
Working capital 975,382
Property and equipment 250,098
Goodwill 1,204,425
Notes payable (1,589,710)
Due to related parties (71,390)
Long term debt and capital
leases (206,358)
-----------
Purchas Price $ 600,000
===========
3. SHARE STOCK
Basic and diluted loss per share are based on the following:
9 months ended 12 months ended
Dec 31/98 Mar 31/98
$ $
-----------------------------------------
Loss for the period 1,688,968 1,154,976
Weighted average number of common shares
used in computation: 7,476,902 6,750,955
Basic and diluted loss per share 0.23 0.17
CERTIFICATE OF INCORPORATION
OF
AMERICLEAN, INC.
The undersigned natural, adult person, acting as incorporator of a
corporation (hereinafter usually referred to as the "Corporation") pursuant to
the provisions of the Delaware Corporation Law, hereby adopts the following
Certificate of Incorporation for said Corporation:
ARTICLE I
Name
The name of the Corporation shall be Americlean, Inc.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
The purpose for which the Corporation is organized is to transact any
or all lawful business for which corporations may be incorporated pursuant to
the Delaware Corporation Law.
ARTICLE IV
Capital Stock
The authorized capital stock of the Corporation shall consist of
50,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of
preferred stock, $0.0001 par value.
ARTICLE V
Preferences, Limitations,
and Relative Rights of
Capital Stock
No share of the common stock shall have any preference over or
limitation in respect to any other share of such common stock. All shares of
common stock shall have equal rights and privileges, including the following:
1. All shares of common stock shall share equally in dividends. Subject
to the applicable provisions of the laws of this State, the Board of
Directors of the Corporation may, from time to time, declare and the
Corporation may pay dividends in cash, property, or its own shares,
except when the Corporation is insolvent or when the payment thereof
would render the Corporation insolvent or when the declaration or
payment thereof would be contrary to any restrictions contained in
these Articles of Incorporation. When any dividend is paid or any other
distribution is made, in whole or in part, from sources other than
unreserved and unrestricted earned surplus, such dividend or
distribution shall be identified as such, and the source and amount per
share paid from each source shall be disclosed to the stockholder
receiving the same concurrently with the distribution thereof and to
all other stockholders not later than six months after the end of the
Corporation's fiscal year during which such distribution was made.
<PAGE>
2. All shares of common stock shall share equally in distributions in
partial liquidation. Subject to the applicable provisions of the laws of this
State, the Board of Directors of the Corporation may distribute, from time to
time, to its stockholders in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of its assets in cash or property,
except when the Corpora- tion is insolvent or when such distribution would
render the Corpora- tion insolvent. Each such distribution, when made, shall be
identi- fied as a distribution in partial liquidation, out of stated capital or
capital surplus, and the source and amount per share paid from each source shall
be disclosed to all stockholders of the Corporation concurrently with the
distribution thereof. Any such distribution may be made by the Board of
Directors from stated capital without the affirmative vote of any stockholders
of the Corporation.
3.(a) Each outstanding share of common stock shall be entitled to one vote
at stockholders' meetings, either in person or by proxy.
(b) The designations, powers, rights, preferences, qualifications,
restrictions and limitations of the preferred stock shall be established from
time to time by the Corporation's Board of Directors, in accordance with the
Delaware Corporation Law.
(c)(i) Cumulative voting shall not be allowed in elections of directors
or for any purpose.
(ii) No holders of shares of capital stock of the Corporation shall
be entitled, as such, to any preemptive or preferential right to subscribe to
any unissued stock or any other securities which the Corporation may now or
hereafter be authorized to issue. The Board of Directors of the Corporation,
however, in its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for subscription solely to the
holders of common stock of the Corporation, or solely to the holders of any
class or classes of such stock, which the Corporation may now or hereafter be
authorized to issue, in such proportions based on stock ownership as said board
in its discretion may determine.
(iii) The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any stockholder "first
right of refusal to purchase" the stock, by making the stock redeemable, or by
restricting the transfer of the stock under such terms and in such manner as the
directors may deem necessary and as are not inconsistent with the laws of this
State. Any stock so restricted must carry a conspicuous legend noting the
restriction and the place where such restriction may be found in the records of
the Corporation.
(iv) The judgment of the Board of Directors as to the adequacy of
any consideration received or to be received for any shares, options, or any
other securities which the Corporation at any time may be authorized to issue or
sell or otherwise dispose of shall be conclusive in the absence of fraud,
subject to the provisions of these Articles of Incorporation and any applicable
law.
ARTICLE VI
Registered Agent
The name and address of the Corporation's initial registered agent
shall be:
The Company Corporation
1313 North Market Street
Wilmington, Delaware 19801-1151
The Board of Directors, however, from time to time may establish such
other offices, branches, subsidiaries, or divisions which it may consider to be
advisable.
ARTICLE VII
Directors
The affairs of the Corporation shall be governed by a board of not less
than one (1) director, who shall be elected in accordance with the Bylaws of the
Corporation. Subject to such limitation, the number of directors shall be fixed
by or in the manner provided in the Bylaws of the Corporation, as may be amended
from time to time. The organization and conduct of the board shall be in
accordance with the following:
l. The name and address of the initial Director, who shall hold office
until the first annual meeting of the stockholders of the Corporation or until
his successor shall have been elected and qualified, is:
Name Address
Andrew Hromyk Suite 2401-1177 West Hastings Street
Vancouver, British Columbia
V6E-2K3
2. The directors of the Corporation need not be residents of Delaware
and shall not be required to hold shares of the Corporation's capital stock.
3. Meetings of the Board of Directors, regular or special, may be held
within or without Delaware upon such notice as may be prescribed by the Bylaws
of the Corporation. Attendance of a director at a meeting shall constitute a
waiver by him of notice of such meeting unless he attends only for the express
purpose of objecting to the transaction of any business thereat on the ground
that the meeting is not lawfully called or convened.
4. A majority of the number of directors at any time constituting the
Board of Directors shall constitute a quorum for the transaction of business.
<PAGE>
5. By resolution adopted by a majority of the Directors at any time
constituting the Board of Directors, the Board of Directors may designate two or
more directors to constitute an Executive Committee or one or more other
committees each of which shall have and may exercise, to the extent permitted
by law or in such resolution, all the authority of the Board of Directors in the
management of the Corpora- tion; but the designation of any such committee and
the delegation of authority thereto shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed on it or him
by law.
6. Any vacancy in the Board of Directors, however caused or created,
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office
and until his successor is duly elected and qualified.
ARTICLE VIII
Officers
The officers of the Corporation shall be prescribed by the Bylaws of
this Corporation.
ARTICLE IX
Meetings of Stockholders
Meetings of the stockholders of the Corporation shall be held at such
place within or without Delaware and at such times as may be prescribed in the
Bylaws of the Corporation. Special meetings of the stockholders of the
Corporation may be called by the President of the Corporation, the Board of
Directors, or by the record holder or holders of at least ten percent (l0%)
of all shares entitled to vote at the meeting. At any meeting of the
stockholders, except to the extent otherwise provided by law, a quorum shall
consist of a majority of the shares entitled to vote at the meeting; and,
if a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote thereat shall be the act of
the stockholders unless the vote of a greater number is required by law.
ARTICLE X
Voting
When, with respect to any action to be taken by stockholders of this
Corporation, the laws of Delaware requires the affirmative vote of the holders
of more than a majority of the outstanding shares entitled to vote thereon, or
of any class or series, such action may be taken by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on such action.
ARTICLE XI
Bylaws
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the stockholders, the power
to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in
the Board of Directors.
<PAGE>
ARTICLE XII
Transactions with Directors and
Other Interested Parties
No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniarily or otherwise interested in, or
are directors or officers of, such other corporation. Any director of the
corporation, individually, or any firm with which such director is affiliated
may be a party to or may be pecuniarily or otherwise interested in any contract
or transaction of the Corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of the Corporation, or a majority thereof, at or before the
entering into such contract or transaction; and any director of the Corporation
who is also a director or officer of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE XIII
Limitation of Director Liability
and Indemnification
No director of the Corporation shall have liability to the Corporation
or to its stockholders or to other security holders for monetary damages for
breach of fiduciary duty as a director; provided, however, that such provisions
shall not eliminate or limit the liability of a director to the Corporation or
to its shareholders or other security holders for monetary damages for: (i) any
breach of the director's duty of loyalty to the Corporation or to its
shareholders or other security holders; (ii) acts or omissions of the director
not in good faith or which involve intentional misconduct or a knowing violation
of the law by such director; (iii) acts by such director as specified by the
Delaware Corporation Law; or (iv) any transaction from which such director
derived an improper personal benefit.
No officer or director shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
Corporation unless such officer or director was personally involved in the
situation giving rise to the injury or unless such officer or director
committed a criminal offense. The protection afforded in the preceding
sentence shall not restrict other common law protections and rights that an
officer or director may have.
The word "director" shall include at least the following, unless
limited by Delaware law: an individual who is or was a director of the
Corporation and an individual who, while a director of a Corporation is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee or agent of any other foreign or domestic corporation or
of any partnership, joint venture, trust, other enterprise or employee
benefit plan. A director shall be considered to be serving an employee
benefit plan at the Corporation's request if his duties to the Corporation
also impose duties on or otherwise involve services by him to the plan or to
participants in or beneficiaries of the plan. To the extent allowed by
Delaware law, the word "director" shall also include the heirs and personal
representatives of all directors.
<PAGE>
This Corporation shall be empowered to indemnify its officers and
directors to the fullest extent provided by law, including but not limited to
the provisions set forth in the Delaware Corporation Law, or any
successor provision.
ARTICLE XIII
Incorporator
The name and address of the incorporator of the Corporation is as
follows:
Name Address
William T. Hart 1624 Washington Street
Denver, CO 80203
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed
his signature on the 28th day of February, 1997.
William T. Hart
CERTIFICATE OF DESIGNATION
Andrew Hromyk and Valerie Moschetti certify that they are the President and
Secretary, respectively, of Americlean, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation") and that, pursuant to the
Corporation's Certificate of Incorporation, as amended, and Section 151 of the
General Business Corporation Law, the Board of Directors of the Corporation
adopted the following resolutions on March 24, 1999; and that none of the Series
A Convertible Preferred Stock referred to in this Certificate of Designation
have been issued.
The Certificate of Designation filed with the Secretary of State for the State
of Delaware September 24, 1998 is hereby repealed in its entirety and the
following is adopted in its place:
1. Creation of Series A Convertible Preferred Stock. There is hereby created a
series of preferred stock consisting of 600 shares and designated as the Series
A Convertible Preferred Stock, having the voting powers, preferences, relative,
participating, limitations, qualifications optional and other special rights and
the qualifications, limitations and restrictions thereof that are set forth
below.
2. Repurchase Provisions. Shares of Series A Convertible Preferred Stock may be
repurchased by the Corporation from holders of shares of Series A Convertible
Preferred Stock by: (i) delivering notice in writing thereof to such holders
prior to the date which is one hundred and twenty (120) calendar days from the
date on which such shares of Series A Convertible Preferred Stock were issued;
and (ii) by the payment to such holders of the sum of $1,200 per share of Series
A Convertible Preferred Stock so repurchased within three (3) business days of
such notice by way of wire transfer, certified check of bank draft.
3. Liquidation Provisions. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, holders of
Series A Convertible Preferred Stock shall be entitled to receive an amount
equal to $1,000.00 per share. After the full preferential liquidation amount has
been paid to, or determined and set apart for the Series A Convertible Preferred
Stock and all other series of Preferred Stock hereafter authorized and issued,
if any, the remaining assets of the Corporation available for distribution to
shareholders shall be distributed ratably to the holders of the common stock. In
the event the assets of the Corporation available for distribution to its
shareholders are insufficient to pay the full preferential liquidation amount
per share required to be paid to the holders of Corporation's Preferred Stock,
the entire amount of assets of the Corporation available for distribution to
shareholders shall be paid up to their respective full liquidation amounts first
to the holders of Series A Convertible Preferred Stock, then to any other series
of Preferred Stock hereafter authorized and issued, all of which amounts shall
be distributed ratably among holders of each such series of Preferred Stock, and
the holders of common stock shall receive nothing. A reorganization or any other
consolidation or merger of the Corporation with or into any other corporation,
or any other sale of all or substantially all of the assets of the Corporation,
shall not be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 3, and the Series A Convertible
Preferred Stock shall be entitled only to: (i) the rights provided in any
agreement or plan governing the reorganization or other consolidation, merger or
sale of assets transaction; (ii) the rights contained in the Delaware General
Corporation Law; and (iii) the rights contained in other Sections hereof.
<PAGE>
4. Conversion Provisions. The shares of Series A Convertible Preferred Stock
shall be subject to the following conversion provisions:
(a) Conversion
(1)The shares of Series A Convertible Preferred Stock shall be
convertible, after the date which is six (6) calendar months from the
date of which such shares of Series A Convertible Preferred Stock
were issued (the "Anniversary Date") and at the option of the holder
thereof, into such number of shares of Common Stock of the
Corporation as is calculated by the Conversion Rate (defined below)
and in any event the shares of Series A Convertible Preferred Stock
shall be deemed to convert into such number of shares of Common Stock
of the Corporation as is calculated by the Conversion Rate on the
date which is the later of:
(i) the date which is thirty calendar days after the
Anniversary Date; or
(ii) the date which is thirty calendar days after the effective
date of a registration statement covering the shares of
Common Stock of the Corporation to be issued upon conversion
of the shares of Series A Convertible Preferred Stock.
The Conversion Rate, subject to the adjustments described below,
shall be that number of Common Shares equal to $1,000 divided by
seventy-five per cent (75%) of the average Market Price of the Common
Stock for the five trading days immediately prior to the Conversion Date
(defined below). For purposes of this Section 4(a)(1), Market Price for a
particular date shall be the closing bid price of the Common Stock on such
date, as reported by the National Association of Securities Dealers
Automated Quotation System (`NASDAQ"), or the closing bid price in the
over-the-counter market if other than NASDAQ.
(2) No fractional shares of Common Stock shall be issued upon conversion
of the shares of Series A Convertible Preferred Stock, and in lieu
thereof the number of shares of Common Stock issuable for each Preferred
Share converted shall be rounded down to the nearest whole number of
shares of Common Stock. Such number of whole shares of Common Stock
issuable upon the conversion of one Preferred Share shall be multiplied
by the number of shares of Series A Convertible Preferred Stock
submitted for conversion pursuant to the Notice of Conversion (defined
below) to determine the total number of shares of Common Stock issuable
in connection with any one particular conversion.
(3) In order to convert the shares of Series A Convertible Preferred
Stock into shares of Common Stock (other than by deemed conversion
pursuant to Section 4(a)(1)(ii) hereof), the holder of the shares of
Series A Convertible Preferred Stock shall: (i) complete, execute and
deliver to the Corporation the conversion certificate attached hereto as
Exhibit A (the "Notice of Conversion"); and (ii) surrender the
certificate or certificates representing the shares of Series A
Convertible Preferred Stock being converted (the "Converted
Certificate") to the Corporation. The Notice of Conversion shall be
effective and in full force and effect for a particular date if
delivered to the Corporation on that particular date prior to 5:00 p.m.
<PAGE>
Pacific Time, by facsimile transmission or otherwise, provided that
particular date is a business day, and provided that the original Notice
of Conversion and the Converted Certificate are delivered to and
received by the Corporation within two (2) business days thereafter at
Suite 1910, 1177 West Hastings Street, Vancouver, BC V6E 2K3, Canada and
that particular date shall be referred to herein as the "Conversion
Date". The person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of the
Conversion Date. If the original Notice of Conversion and the Converted
Certificate are not delivered to and received by the Corporation within
two (2) business days following the Conversion Date, the Notice of
Conversion shall become null and void as if it were never given and the
Corporation shall, within two (2) business days thereafter, return to
the holder by overnight courier any Converted Certificate that may have
been submitted in connection with any such conversion. In the event that
any Converted Certificate submitted represents a number of shares of
Series A Convertible Preferred Stock that is greater than the number of
such shares that is being converted pursuant to the Notice of Conversion
delivered in connection therewith, the Corporation shall deliver,
together with the certificates for the shares of Common Stock issuable
upon such conversion as provided herein, a certificate representing the
remaining number of shares of Series A Convertible Preferred Stock not
converted.
(4) Upon receipt of a Notice of Conversion, the Corporation shall
absolutely and unconditionally be obligated to cause a certificate or
certificates representing the number of shares of Common Stock to which
a converting holder of shares of Series A Convertible Preferred Stock
shall be entitled as provided herein, which shares shall constitute
fully paid and non- assessable shares of Common Stock to be delivered by
overnight courier to, and received by such holder by the third (3rd)
business day following the Conversion Date. Such delivery shall be made
at such address as such holder may designate therefor in its Notice of
Conversion or in its written instructions submitted together therewith.
(5) No less than 25 shares of Series A Convertible Preferred Stock may
be converted at any one time, unless the holder then holds less than 25
shares and converts all such shares held by it at that time.
(6) In the event of the deemed conversion of shares of Series A
Convertible Preferred Stock in shares of Common Stock pursuant to
Section 4(a)(1)(ii) hereof the Corporation shall cancel all of the
shares of Series A Convertible Preferred Stock then outstanding and
shall issue such number of shares of Common Stock at the Conversion Rate
in the names of the registered holders of the shares of Series A
Convertible Preferred Stock so converted and shall hold same as bare
trustee for each such holder until such time as such holder has
delivered the certificate or certificates representing such shares of
Series A Convertible Preferred Stock to the Corporation. The person or
persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of the date of such
conversion.
<PAGE>
(b) Adjustments to Conversion Rate
(1) Reclassification, Exchange and Substitution. If the Common Stock
issuable on conversion of the Series A Convertible Preferred Stock shall
be changed into the same or a different number of shares or into any
other class or classes of stock, whether by capital reorganization,
reclassification, reverse stock split or forward stock split or stock
dividend or otherwise (other than a subdivision or combination of shares
provided for above), the holders of the Series A Convertible Preferred
Stock shall, upon its conversion, be entitled to receive, in lieu of the
Common Stock which the holders would have become entitled to receive but
for such change, a number of shares of such other class or classes of
stock that would have been subject to receipt by the holders if they had
exercised their rights of conversion of the Series A Convertible
Preferred Stock immediately before that change.
(2) Reorganizations, Mergers, Consolidations or Sale of Assets. If at
any time there shall be a capital reorganization of the Corporation's
common stock (other than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section (4)) or merger
of the Corporation into another corporation, or the sale of the
Corporation's properties and assets as, or substantially as, an entirety
to any other person, then, as a part of such reorganization, merger or
sale, lawful provision shall be made so that the holders of the Series A
Convertible Preferred Stock, shall be entitled to receive the number of
shares of stock or other securities or property of the Corporation, or
of the successor corporation resulting from such merger, to which
holders of the Common Stock deliverable upon conversion of the Series A
Convertible Preferred Stock would have been entitled on such capital
reorganization, merger or sale if the Series A Convertible Preferred
Stock had been converted immediately before that capital reorganization,
merger or sale to the end that the provisions of this paragraph (b)(2)
(including adjustment of the Conversion Rate then in effect and the
number of shares purchasable upon conversion of the Series A Convertible
Preferred Stock) shall be applicable after that event as nearly
equivalently as may be practicable.
(c)No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, 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 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Convertible Preferred
Stock against impairment.
(d)Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Rate for any shares of Series A
Convertible Preferred Stock, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Series A
Convertible Preferred Stock effected thereby a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation shall,
upon the written request at any time of any holder of Series A
Convertible Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the Conversion Rate at the time in effect; and (iii)
the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of such
holder's shares of Series A Convertible Preferred Stock.
<PAGE>
(e)Reservation of Stock Issuable upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Convertible Preferred Stock
such number of its shares of Common Stock as shall from time to time be
sufficient, based on the Conversion Rate then in effect, to effect the
conversion of all then outstanding shares of the Series A Preferred
Stock. 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 Preferred Stock, then, in addition to all
rights, claims and damages to which the holders of the Series A
Convertible Preferred Stock shall be entitled to receive at law or in
equity as a result of such failure by the Corporation to fulfill its
obligations to the holders hereunder, the Corporation will take any and
all corporate or other action as may, in the opinion of its counsel, be
helpful, appropriate or necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(f)Notices. Any notices required by the provisions hereof to be given to
the holders of shares of Series A Convertible Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid and
return receipt requested, and addressed to each holder of record at its
address appearing on the books of the Corporation or to such other
address of such holder or its representative as such holder may direct.
5. Voting Provisions. Except as otherwise expressly provided or required by law,
the Series A Convertible Preferred Stock shall have no voting rights.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation
of Series A Convertible Preferred Stock to be duly executed by its President and
attested to by its Secretary this 24th day of March, 1999 who, by signing their
names hereto, acknowledge that this Certificate of Designation is the act of the
Corporation and state to the best of their knowledge, information and belief,
under the penalties of perjury, that the above matters and facts are true in all
material respects.
AMERICLEAN, INC.
Andrew Hromyk, President
Valerie Moschetti, Secretary
BYLAWS
OF
AMERICLEAN, INC.
ARTICLE I
OFFICES
Section l. Offices:
The principal office of the Corporation shall be determined by the
Board of Directors, and the Corporation shall have other offices at such places
as the Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDER'S MEETINGS
Section l. Place:
The place of stockholders' meetings shall be the principal office of
the Corporation unless some other place shall be determined and designated from
time to time by the Board of Directors.
Section 2. Annual Meeting:
The annual meeting of the stockholders of the Corporation for the
election of directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held each year on a date to be determined by the Board of Directors.
Section 3. Special Meetings:
Special meetings of the stockholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of ten percent
(l0%) or more of all the shares entitled to vote at such meeting, by the giving
of notice in writing as hereinafter described.
Section 4. Voting:
At all meetings of stockholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the stockholder voting, the
number of shares voted, and, if such vote shall be by proxy, the name of the
proxy holder. Voting may be in person or by proxy appointed in writing, manually
signed by the stockholder or his duly authorized attorney-in-fact. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided therein.
<PAGE>
Each stockholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty (50) days preceding the meeting, for the
determination of stockholders entitled to vote. The Secretary of the Corporation
shall make, at least ten (l0) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten (l0) days prior
to such meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting.
Section 5. Order of Business:
The order of business at any meeting of stockholders shall be as
follows:
l. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the meeting and
the existence or lack of a quorum.
5. Reading of minutes of last previous meeting and disposal of any
unapproved minutes.
6. Reports of officers.
7. Reports of committees.
8. Election of directors, if appropriate.
9. Unfinished business.
l0. New business.
ll. Adjournment.
l2. To the extent that these Bylaws do not apply, Roberts' Rules of
Order shall prevail.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section l. Organization and Powers: The Board of Directors shall constitute the
policy-making or legislative authority of the Corporation. Management of the
affairs, property, and business of the Corporation shall be vested in the Board
of Directors, which shall consist of not less than one nor more than ten
members, who shall be elected at the annual meeting of stockholders by a
plurality vote for a term of one (l) year, and shall hold office until their
successors are elected and qualify. Directors need not be stockholders.
Directors shall have all powers with respect to the management, control, and
determination of policies of the Corporation that are not limited by these
Bylaws, the Articles of Incorporation, or by statute, and the enumeration of any
power shall not be considered a limitation thereof.
Section 2. Vacancies:
Any vacancy in the Board of Directors, however caused or created, shall
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board, or at a special meeting of the
stockholders called for that purpose. The directors elected to fill vacancies
shall hold office for the unexpired term and until their successors are elected
and qualify.
Section 3. Regular Meetings:
A regular meeting of the Board of Directors shall be held, without
other notice than this Bylaw, immediately after and at the same place as the
annual meeting of stockholders or any special meeting of stockholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Colorado, for the holding of additional regular meetings without other notice
than such resolution.
Section 4. Special Meetings:
Special meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be fixed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting. A resolution in writing signed by
all the directors shall be as valid and effectual as if it had been passed at a
meeting of the directors duly called, constituted, and held.
<PAGE>
Section 5. Notices: Notices of both regular and special meetings, save when held
by unanimous consent or participation, shall be mailed by the Secretary to each
member of the Board not less than three days before any such meeting and notices
of special meetings may state the purposes thereof. No failure or irregularity
of notice of any regular meeting shall invalidate such meeting or any proceeding
thereat.
Section 6. Quorum and Manner of Acting:
A quorum for any meeting of the Board of Directors shall be a majority
of the Board of Directors as then constituted. Any act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
Section 7. Executive Committee:
The Board of Directors may by resolution of a majority of the Board
designate two (2) or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation; but the designation of such committee and the delegation of
authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on it or him by law.
Section 8. Order of Business:
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows:
l. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
6. To the extent that these Bylaws do not apply, Roberts' Rules of
Order shall prevail.
<PAGE>
Section 9. Remuneration:
No stated salary shall be paid to directors for their
services as such, but, by resolution of the Board of Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board. Members of special or standing committees may be
allowed like compensation for attending meetings. Nothing herein contained shall
be construed to preclude any director from receiving compensation for serving
the Corporation in any other capacity, subject to such resolutions of the Board
of Directors as may then govern receipt of such compensation.
ARTICLE IV
OFFICERS
Section l. Titles:
The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, and a Treasurer, who shall be elected by the
directors at their first meeting following the annual meeting of stockholders.
Such officers shall hold office until removed by the Board of Directors or until
their successors are elected and qualify. The Board of Directors may appoint
from time to time such other officers as it deems desirable who shall serve
during such terms as may be fixed by the Board at a duly held meeting. The
Board, by resolution, shall specify the titles, duties and responsibilities of
such officers.
Section 2. President:
The President shall preside at all meetings of stockholders and, in the
absence of a, or the, Chairman of the Board of Directors, at all meetings of the
directors. He shall be generally vested with the power of the chief executive
officer of the Corporation and shall countersign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors
or required by law. He shall make reports to the Board of Directors and
stockholders and shall perform such other duties and services as may be required
of him from time to time by the Board of Directors.
Section 3. Vice President:
The Vice President shall perform all the duties of the President if the
President is absent or for any other reason is unable to perform his duties and
shall have such other duties as the Board of Directors shall authorize or
direct.
Section 4. Secretary:
The Secretary shall issue notices of all meetings of stockholders and
directors, shall keep minutes of all such meetings, and shall record all
proceedings. He shall have custody and control of the corporate records and
books, excluding the books of account, together with the corporate seal. He
shall make such reports and perform such other duties as may be consistent with
his office or as may be required of him from time to time by the Board of
Directors.
<PAGE>
Section 5. Treasurer:
The Treasurer shall have custody of all moneys and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all moneys, securities, and other valuable effects of the
Corporation in such banks and depositories as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts and demands against the Corporation, or as they may be ordered by the
Board of Directors, shall render such account of his transactions as may be
required of him by the President or the Board of Directors from time to time and
shall otherwise perform such duties as may be required of him by the Board of
Directors.
The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.
Section 6. Vacancies or Absences:
If a vacancy in any office arises in any manner, the directors then in
office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate officer as seems advisable to the Board.
Section 7. Compensation:
No officer shall receive any salary or compensation for his services
unless and until the Board of Directors authorizes and fixes the amount and
terms of such salary or compensation.
ARTICLE V
STOCK
Section 1. Regulations:
The Board of Directors shall have power and authority to take all such
rules and regulations as they deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the Corporation.
The Board of Directors may appoint a Transfer Agent and/or a Registrar and may
require all stock certificates to bear the signature of such Transfer Agent
and/or Registrar.
<PAGE>
Section 2. Restrictions on Stock: The Board of Directors may restrict any stock
issued by giving the Corporation or any stockholder "first right of refusal to
purchase" the stock, by making the stock redeemable or by restricting the
transfer of the stock, under such terms and in such manner as the directors may
deem necessary and as are not inconsistent with the Articles of Incorporation or
by statute. Any stock so restricted must carry a stamped legend setting out the
restriction or conspicuously noting the restriction and stating where it may be
found in the records of the Corporation.
ARTICLE VI
DIVIDENDS AND FINANCES
Section l. Dividends:
Dividends may be declared by the directors and paid out of any funds
legally available therefor under the laws of Colorado, as may be deemed
advisable from time to time by the Board of Directors of the Corporation. Before
declaring any dividends, the Board of Directors may set aside out of net profits
or earned or other surplus such sums as the Board may think proper as a reserve
fund to meet contingencies or for other purposes deemed proper and to the best
interests of the Corporation.
Section 2. Monies:
The monies, securities, and other valuable effects of the Corporation
shall be deposited in the name of the Corporation in such banks or trust
companies as the Board of Directors shall designate and shall be drawn out or
removed only as may be authorized by the Board of Directors from time to time.
Section 3. Fiscal Year:
Unless and until the Board of Directors by resolution shall determine
the fiscal year of the Corporation.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended, or repealed by the Board of
Directors by resolution of a majority of the Board.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify any and all of its directors or
officers, or former directors or officers, or any person who may have served at
its request as a director or officer of another corporation in which this
Corporation owns shares of capital stock or of which it is a creditor and the
personal representatives of all such persons, against expenses actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding in which they, or any of them, were made parties, or a party, by
reason of being or having been directors or officers or a director or officer of
the Corporation, or of such other corporation, except in relation to matters as
to which any such director or officer or person shall have been adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of any duty owed to the Corporation. Such indemnification shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled, independently of this Article, by law, under any Bylaw agreement, vote
of stockholders, or otherwise.
<PAGE>
ARTICLE IX
CONFLICTS OF INTEREST
No contract or other transaction of the Corporation with any other
persons, firms or corporations, or in which the Corporation is interested, shall
be affected or invalidated by the fact that any one or more of the directors or
officers of the Corporation is interested in or is a director or officer of such
other firm or corporation; or by the fact that any director or officer of the
Corporation, individually or jointly with others, may be a party to or may be
interested in any such contract or transaction.
AMERICLEAN, INC.
1998 INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of the Incentive Stock Option Plan (the "Plan")
is to advance the interests of Americlean, Inc. and any subsidiary corporation
(hereinafter referred to as the "Company") and all of its shareholders, by
strengthening the Company's ability to attract and retain in its employ
individuals of training, experience, and ability, and to furnish additional
incentive to officers and valued employees upon whose judgment, initiative, and
efforts the successful conduct and development of its business largely depends,
by encouraging such officers and employees to become owners of capital stock of
the Company.
This will be effected through the granting of stock options as
herein provided, which options are intended to qualify as "Incentive Stock
Options" within the meaning of Section 422 of the Internal Revenue Code, as
amended (the "Code").
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the directors duly appointed to administer
the Plan.
(c) "Common Stock" means the Company's Common Stock.
(d) "Date of Grant" means the date on which an Option is granted
under the Plan.
(e) "Option" means an Option granted under the Plan.
(f) "Optionee" means a person to whom an Option, which has not
expired, has been granted under the Plan.
(g) "Successor" means the legal representative of the estate of a
deceased optionee or the person or persons who acquire the right to exercise an
Option by bequest or inheritance or by reason of the death of any Optionee.
3. Administration of Plan. The Plan shall be administered by the
Company's Board of Directors or in the alternative, by a committee of two or
more directors appointed by the Board (the "Committee"). If a Committee should
be appointed, the Committee shall report all action taken by it to the Board.
The Committee shall have full and final authority in its discretion, subject to
the provisions of the Plan, to determine the individuals to whom and the time or
times at which Options shall be granted and the number of shares and purchase
price of Common Stock covered by each Option; to construe and interpret the
Plan; to determine the terms and provisions of the respective Option agreements,
which need not be identical, including, but without limitation, terms covering
the payment of the Option Price; and to make all other determinations and take
all other actions deemed necessary or advisable for the proper administration of
the Plan. All such actions and determinations shall be conclusively binding for
all purposes and upon all persons.
4. Common Stock Subject to Options. The aggregate number of shares of
the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 250,000. The shares of Common Stock
to be issued upon the exercise of Options may be authorized but unissued shares,
shares issued and reacquired by the Company or shares bought on the market for
the purposes of the Plan. In the event any Option shall, for any reason,
terminate or expire or be surrendered without having been exercised in full, the
shares subject to such Option but not purchased thereunder shall again be
available for Options to be granted under the Plan.
The aggregate fair market value (determined as of the time any option
is granted) of the stock for which any employee may be granted options which are
first exercisable in any single calendar year under this Plan (and any other
plan of the Company meeting the requirements for Incentive Stock Option Plans)
shall not exceed $100,000.
5. Participants. Options will be granted only to persons who are
employees of the Company and only in connection with any such person's
employment. The term "employees" shall include officers as well as other
employees, and the officers and other employees who are directors of the
Company. The Committee will determine the employees to be granted options and
the number of shares subject to each option.
6. Terms and Conditions of Options. Any Option granted under the Plan
shall be evidenced by an agreement executed by the Company and the recipient and
shall contain such terms and be in such form as the Committee may from time to
time approve, subject to the following limitations and conditions:
(a) Option Price. The purchase price of each option shall not be
less than 100% of the fair market value of the Company's common stock at the
time of the granting of the option provided, however, if the optionee, at the
time the option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the purchase price
of the option shall not be less than 110% of the fair market value of the stock
at the time of the granting of the option.
(b) Period of Option. The maximum period for exercising an option
shall be 10 years from the date upon which the option is granted, provided,
however, if the optionee, at the time the option is granted, owns stock
possessing more than l0% of the total combined voting power of all classes of
stock of the Company, the maximum period for exercising an option shall be five
years from the date upon which the option is granted and provided further,
however, that these periods may be shortened in accordance with the provisions
of Paragraph 7 below.
Subject to the foregoing, the period during which each option may be
exercised, and the expiration date of each Option shall be fixed by the
Committee.
If an optionee shall cease to be employed by the Company due to
disability, as defined in Section 22(e)(3) of the Code, he may, but only within
the one year next succeeding such cessation of employment, exercise his option
to the extent that he was entitled to exercise it on the date of such cessation.
The Plan will not confer upon any optionee any right with respect to continuance
of employment by the Company, nor will it interfere in any way with his right,
or his employer's right, to terminate his employment at any time.
(c) Vesting of Shareholder Rights. Neither an Optionee nor his
successor shall have any rights as a shareholder of the Company until the
certificates evidencing the shares purchased are properly delivered to such
Optionee or his successor.
(d) Exercise of Option. Each Option shall be exercisable from time
to time during a period (or periods) determined by the Committee and ending upon
the expiration or termination of the Option; provided, however, the Committee
may, by the provisions of any Option Agreement, limit the number of shares
purchaseable thereunder in any period or periods of time during which the Option
is exercisable. An Option shall not be exercisable in whole or in part prior to
the date of shareholder approval of the Plan.
Options may be exercised in part from time to time during the
option period. The exercise of any option will be contingent upon compliance by
the Optionee (or purchaser acting pursuant to Section 6(b)) with the provisions
of Section 10 below and upon receipt by the Company of either (i) cash or
certified bank check payable to its order in the amount of the purchase price of
such shares (ii) shares of Company stock having a fair market value equal to the
purchase price of such shares, or (iii) a combination of (i) and (ii). If any
law or regulation requires the Company to take any action with respect to the
shares to be issued upon exercise of any option, then the date for delivery of
such stock shall be extended for the period necessary to take such action.
(e) Nontransferability of Option. No Option shall be transferable
or assignable by an Optionee, otherwise than by will or the laws of descent and
distribution and each Option shall be exercisable, during the Optionee's
lifetime, only by him. No Option shall be pledged or hypothecated in any way and
no Option shall be subject to execution, attachment, or similar process except
with the express consent of the Committee.
(f) Death of Optionee. In the event of the death of an optionee
while in the employ of the Company, the option theretofore granted to him shall
be exercisable only within the three months succeeding such death and then only
(i) by the person or persons to whom the optionee's rights under the option
shall pass by the optionee's will or by the laws of descent and distribution,
and (ii) if and to the extent that he was entitled to exercise the option at the
date of his death.
7. Assumed Options. In connection with any transaction to which Section
424(a) of the Code is applicable, options may be granted pursuant hereto in
substitution of existing options or existing options may be assumed as
prescribed by that Section and any regulations issued thereunder.
Notwithstanding anything to the contrary contained in this Plan, options granted
pursuant to this Paragraph shall be at prices and shall contain such terms,
provisions, and conditions as may be determined by the Committee and shall
include such provisions and conditions as may be necessary to meet the
requirements of Section 424(a) of the Code.
8. Certain Dispositions of Shares. Any options granted pursuant to this
Plan shall be conditioned such that if, within the earlier of (i) the two-year
period beginning on the date of grant of an option or (ii) the one-year period
beginning on the date after which any share of stock is transferred to an
individual pursuant to his exercise of an option, such an individual makes a
disposition of such share of stock by way of sale, exchange, gift, transfer of
legal title, or otherwise, such individual shall promptly report such
disposition to the Company in writing and shall furnish to the Company such
details concerning such disposition as the Company may reasonably request.
9. Reclassification, Consolidation, or Merger. If and to the extent
that the number of issued shares of Common Stock of the Corporaton shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to Option and the Option price per share shall be proportionately
adjusted by the Committee, whose determination shall be conclusive. If the
Corporation is reorganized or consolidated or merged with another corporation,
an Optionee granted an Option hereunder shall be entitled to receive Options
covering shares of such reorganized, consolidated, or merged company in the same
proportion, at an equivalent price, and subject to the same conditions. The new
Option or assumption of the old Option shall not give Optionee additional
benefits which he did not have under the old Option, or deprive him of benefits
which he had under the old Option.
10. Restrictions on Issuing Shares. The exercise of each Option shall
be subject to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares purchased thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Unless the shares of stock covered by the Plan have been registered
with the Securities and Exchange Commission pursuant to Section 5 of the
Securities Act of l933, each optionee shall, by accepting an option, represent
and agree, for himself and his transferrees by will or the laws of descent and
distribution, that all shares of stock purchased upon the exercise of the option
will be acquired for investment and not for resale or distribution. Upon such
exercise of any portion of an option, the person entitled to exercise the same
shall, upon request of the Company, furnish evidence satisfactory to the Company
(including a written and signed representation) to the effect that the shares of
stock are being acquired in good faith for investment and not for resale or
distribution. Furthermore, the Company may, if it deems appropriate, affix a
legend to certificates representing shares of stock purchased upon exercise of
options indicating that such shares have not been registered with the Securities
and Exchange Commission and may so notify its transfer agent. Such shares may be
disposed of by an optionee in the following manner only: (l) pursuant to an
effective registration statement covering such resale or reoffer, (2) pursuant
to an applicable exemption from registration as indicated in a written opinion
of counsel acceptable to the Company, or (3) in a transaction that meets all the
requirements of Rule l44 of the Securities and Exchange Commission. If shares of
stock covered by the Plan have been registered with the Securities and Exchange
Commission, no such restrictions on resale shall apply, except in the case of
optionees who are directors, officers, or principal shareholders of the Company.
Such persons may dispose of shares only by one of the three aforesaid methods.
11. Use of Proceeds. The proceeds received by the Company from the sale
of Common Stock pursuant to the exercise of Options granted under the Plan shall
be added to the Company's general funds and used for general corporate purposes.
l2. Amendment, Suspension, and Termination of Plan. The Board of
Directors may alter, suspend, or discontinue the Plan, but may not, without the
approval of a majority of those holders of the Company's Common Stock voting in
person or by proxy at any meeting of the Company's shareholders, make any
alteration or amendment thereof which operates to (a) make any material change
in the class of eligible employees as defined in Section 5, (b) extend the term
of the Plan or the maximum option periods provided in paragraph 6, (c) decrease
the minimum option price provided in paragraph 6, except as provided in
paragraph 9, or (d) materially increase the benefits accruing to employees
participating under this Plan.
Unless the Plan shall theretofore have been terminated by the Board,
the Plan shall terminate ten years after the effective date of the Plan. No
Option may be granted during any suspension or after the termination of the
Plan. No amendment, suspension, or termination of the Plan shall, without an
Optionee's consent, alter or impair any of the rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
13. Limitations. Every right of action by any person receiving options
pursuant to this Plan against any past, present or future member of the Board,
or any officer or employee of the Company arising out of or in connection with
this Plan shall, irrespective of the place where such action may be brought and
irrespective of the place of residence of any such director, officer or employee
cease and be barred by the expiration of one year from the date of the act or
omission in respect of which such right of action arises.
14. Governing Law. The Plan shall be governed by the laws of the State
of Delaware.
l5. Expenses of Administration. All costs and expenses incurred in
the operation and adminstration of this Plan shall be borne by the Company.
AMERICLEAN, INC.
NON-QUALIFIED STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan (the "Plan") is
intended to advance the interests of Americlean, Inc. (the "Company") and its
shareholders, by encouraging and enabling selected officers, directors,
consultants and key employees upon whose judgment, initiative and effort the
Company is largely dependent for the successful conduct of its business, to
acquire and retain a proprietary interest in the Company by ownership of its
stock. Options granted under the Plan are intended to be Options which do not
meet the requirements of Section 422 of the Internal Revenue Code of l954, as
amended (the "Code").
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the directors duly appointed to administer the
Plan.
(c) "Common Stock" means the Company's Common Stock.
(d) "Date of Grant" means the date on which an Option is granted under
the Plan.
(e) "Option" means an Option granted under the Plan.
(f) "Optionee" means a person to whom an Option, which has not expired,
has been granted under the Plan.
(g) "Successor" means the legal representative of the estate of a
deceased optionee or the person or persons who acquire the right to exercise an
Option by bequest or inheritance or by reason of the death of any Optionee.
3. Administration of Plan. The Plan shall be administered by the
Company's Board of Directors or in the alternative, by a committee of two or
more directors appointed by the Board (the "Committee"). If a Committee should
be appointed, the Committee shall report all action taken by it to the Board.
The Committee shall have full and final authority in its discretion, subject to
the provisions of the Plan, to determine the individuals to whom and the time or
times at which Options shall be granted and the number of shares and purchase
price of Common Stock covered by each Option; to construe and interpret the
Plan; to determine the terms and provisions of the respective Option agreements,
which need not be identical, including, but without limitation, terms covering
the payment of the Option Price; and to make all other determinations and take
all other actions deemed necessary or advisable for the proper administration of
the Plan. All such actions and determinations shall be conclusively binding for
all purposes and upon all persons.
<PAGE>
4. Common Stock Subject to Options. The aggregate number of shares of
the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 2,000,000, subject to adjustment under
the provisions of paragraph 7. The shares of Common Stock to be issued upon the
exercise of Options may be authorized but unissued shares, shares issued and
reacquired by the Company or shares bought on the market for the purposes of the
Plan. In the event any Option shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, the shares subject to such
Option but not purchased thereunder shall again be available for Options to be
granted under the Plan.
5. Participants. Options may be granted under the Plan the Company's
employees, directors and officers, and consultants or advisors to the Company,
provided however that bona fide services shall be rendered by such consultants
or advisors and such services must not be in connection with the offer or sale
of securities in a capital-raising transaction.
6. Terms and Conditions of Options. Any Option granted under the Plan
shall be evidenced by an agreement executed by the Company and the recipient and
shall contain such terms and be in such form as the Committee may from time to
time approve, subject to the following limitations and conditions:
(a) Option Price. The Option Price per share with respect to each
Option shall be determined by the Committee but shall in no instance be less
than the par value of the Common Stock.
(b) Period of Option. The period during which each option may be
exercised, and the expiration date of each Option shall be fixed by the
Committee, but, notwithstanding any provision of the Plan to the contrary, such
expiration date shall not be more than ten years from the date of Grant.
(c) Vesting of Shareholder Rights. Neither an Optionee nor his
successor shall have any rights as a shareholder of the Company until the
certificates evidencing the shares purchased are properly delivered to such
Optionee or his successor.
(d) Exercise of Option. Each Option shall be exercisable from time
to time during a period (or periods) determined by the Committee and ending upon
the expiration or termination of the Option; provided, however, the Committee
may, by the provisions of any Option Agreement, limit the number of shares
purchasable thereunder in any period or periods of time during which the Option
is exercisable.
(e) Nontransferability of Option. No Option shall be transferable
or assignable by an Optionee, otherwise than by will or the laws of descent and
distribution and each Option shall be exercisable, during the Optionee's
lifetime, only by him. No Option shall be pledged or hypothecated in any way and
no Option shall be subject to execution, attachment, or similar process except
with the express consent of the Committee.
<PAGE>
(f) Death of Optionee. If an Optionee dies while holding an Option
granted hereunder, his Option privileges shall be limited to the shares which
were immediately purchasable by him at the date of death and such Option
privileges shall expire unless exercised by his successor within four months
after the date of death.
7. Reclassification, Consolidation, or Merger. If and to the extent
that the number of issued shares of Common Stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to Option and the Option price per share shall be proportionately
adjusted by the Committee, whose determination shall be conclusive. If the
Corporation is reorganized or consolidated or merged with another corporation,
an Optionee granted an Option hereunder shall be entitled to receive Options
covering shares of such reorganized, consolidated, or merged company in the same
proportion, at an equivalent price, and subject to the same conditions. The new
Option or assumption of the old Option shall not give Optionee additional
benefits which he did not have under the old Option, or deprive him of benefits
which he had under the old Option.
8. Restrictions on Issuing Shares. The exercise of each Option shall be
subject to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares purchased thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Unless the shares of stock covered by the Plan have been
registered with the Securities and Exchange Commission pursuant to Section 5 of
the Securities Act of l933, each optionee shall, by accepting an option,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon the exercise
of the option will be acquired for investment and not for resale or
distribution. Upon such exercise of any portion of an option, the person
entitled to exercise the same shall, upon request of the Company, furnish
evidence satisfactory to the Company (including a written and signed
representation) to the effect that the shares of stock are being acquired in
good faith for investment and not for resale or distribution. Furthermore, the
Company may, if it deems appropriate, affix a legend to certificates
representing shares of stock purchased upon exercise of options indicating that
such shares have not been registered with the Securities and Exchange Commission
and may so notify the Company's transfer agent. Such shares may be disposed of
by an optionee in the following manner only: (l) pursuant to an effective
registration statement covering such resale or reoffer, (2) pursuant to an
applicable exemption from registration as indicated in a written opinion of
counsel acceptable to the Company, or (3) in a transaction that meets all the
requirements of Rule l44 of the Securities and Exchange Commission. If shares of
stock covered by the Plan have been registered with the Securities and Exchange
Commission, no such restrictions on resale shall apply, except in the case of
optionees who are directors, officers, or principal shareholders of the Company.
Such persons may dispose of shares only by one of the three aforesaid methods.
<PAGE>
9. Use of Proceeds. The proceeds received by the Company from the sale
of Common Stock pursuant to the exercise of Options granted under the Plan shall
be added to the Company's general funds and used for general corporate purposes.
l0. Amendment, Suspension, and Termination of Plan. The Board of
Directors may alter, suspend, or discontinue the Plan at any time but may not
make any material change in the terms of any options previously granted
pursuant to this Plan.
Unless the Plan shall theretofore have been terminated by the Board,
the Plan shall terminate ten years after the effective date of the Plan. No
Option may be granted during any suspension or after the termination of the
Plan. No amendment, suspension, or termination of the Plan shall, without an
Optionee's consent, alter or impair any of the rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
11. Limitations. Every right of action by or on behalf of the Company
or by any shareholder against any past, present or future member of the Board,
or any officer or employee of the Company arising out of or in connection with
this Plan shall, irrespective of the place where such action may be brought and
irrespective of the place of residence of any such director, officer or employee
cease and be barred by the expiration of one year from whichever is the later of
(a) the date of the act or omission in respect of which such right of action
arises; or (b) the first date upon which there has been made generally available
to shareholders an annual report of the Company or any proxy statement for the
annual meeting of shareholders following the issuance of such annual report,
which annual report and proxy statement alone or together set forth, for the
related period, the number of shares issuable upon the exercise of the options
granted pursuant to this Plan; and any and all right of action by any employee
(past, present or future) against the Company arising out of or in connection
with this Plan shall, irrespective of the place where such action may be
brought, cease and be barred by the expiration of one year from the date of the
act or omission in respect of which such right of action arises.
l2. Governing Law. The Plan shall be governed by the laws of the
State of Delaware.
l3. Expenses of Administration. All costs and expenses incurred in
the operation and administration of this Plan shall be borne by the Company.
OPINION OF COUNSEL
May 14, 1999
Americlean, Inc.
1177 W. Hastings Street
Suite 1910
Vancouver, British Columbia
Canada V6E 2K3
This letter will constitute an opinion upon the legality of the sale by certain
Selling Shareholders of Americlean, Inc., a Delaware corporation (the "Company")
of up to 1,200,000 shares of Common Stock, all as referred to in the
Registration Statement on Form SB-2 filed by the Company with the Securities and
Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws and the minutes of
the Board of Directors of the Company and the applicable laws of the State of
Delaware, and a copy of the Registration Statement. In our opinion, the Company
is authorized to issue the shares of stock issuable upon the conversion of the
Company's Series A Preferred Stock and/or the exercise of the options described
in the Registration Statement, and such shares, when issued, will represent
fully paid and non-assessable shares of the Company's Common Stock.
Very truly yours,
HART & TRINEN, LLP
William T. Hart
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 25th day of
January, 1999.
AMONG:
AMERICLEAN, INC., a body corporate formed pursuant to the laws of
the State of Delaware and having an office for business located at
1910, 1177 West Hastings Street, Vancouver, British Columbia, V6E
2K3
("Americlean")
AND:
BOGGS & COMPANY (1998), INC., a body corporate formed pursuant to
the laws of the State of North Carolina and a wholly-owned
subsidiary of Americlean
("Boggs 1998", and Americlean and Boggs 1998 being
hereinafter collectively referred to as the
"Purchasers")
AND:
BOGGS & COMPANY, INC., a body corporate formed pursuant to the laws
of the state of North Carolina and having an office for business
located at 3931 Glenwood Drive, Charlotte, North Carolina, 28208
("Boggs")
AND:
JKG GROUP, INC., a body corporate formed pursuant to the laws of the
state of Florida and having an office for business located at 3931
Glenwood Drive, Charlotte, North Carolina, 28208
("JKG", and Boggs and JKG being hereinafter
collectively referred to as the "Vendors")
AND:
JAY C. SHINN, Businessman, of 7404 Red Oak Lane,
Charlotte, North Carolina, 28226
("Shinn")
AND:
JAMES HYNOSKI, Businessman, of 9600 Logan Court,
Charlotte, North Carolina, 28210
("Hynoski", and Shinn and Hynoski being hereinafter
collectively referred to as the "Covenantors")
<PAGE>
WHEREAS:
A. The Vendors own and operate a laundry and dry cleaning equipment and
supply distribution business and repair business under the trade name
"Boggs & Company" and variations thereof (the "Business");
B. The Vendors have agreed to sell to Boggs 1998 and Boggs 1998 has agreed to
purchase from the Vendors, subject to certain exceptions hereinafter
enumerated, substantially all of the property, assets and undertaking of
the Business as a going concern, on the terms and subject to the
conditions contained in this Agreement; and
C. The Covenantors are the owners of the Vendors and are being made parties
to this Agreement for the purpose of jointly and severally covenanting
with the Vendors to indemnify the Purchasers in the manner hereinafter
provided.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement, including its recitals, the following terms will have the
following meanings:
(a) "Accounts Receivable" means all accounts receivable, trade accounts,
notes receivable and other debts owing to the Vendors in connection
with or arising out of the Business, and the full benefit of all
securities for such accounts, notes or debts, as of the Closing
Date, but not including any Accounts Receivable comprised in the
Excluded Assets;
(b) "Acquisition Shares" means the Americlean Shares to be issued in the
names of the Vendors at the Time of Closing as calculated pursuant
to Article 2 hereof;
(c) "Advance" means the sum of $50,000 to be paid by Boggs 1998 to the
Vendors concurrent with the execution of this Agreement;
(d) "Agreement" means this asset purchase agreement among the
Purchasers, the Vendors and the Covenantors;
(e) "Americlean" means Americlean, Inc.;
(f) "Americlean Shares" means the shares of common stock in the capital
of Americlean;
(g) "Assumed Accounts Payable and Liabilities" means all accounts
payable and liabilities of the Vendors relating to the Business
or the Purchased Assets on the Closing Date excluding the
Excluded Liabilities. For greater certainty the Assumed Accounts
Payable and Liabilities shall include the trade payables of the
Vendors incurred in the ordinary course up to the Closing Date,
the liabilities of the Vendors on the most recent Financial
Statements (including Closing Date balances), and liabilities
related to the Purchased Assets;
<PAGE>
(h) "Assumed Material Contracts" means those trade and non-trade
contracts, engagements or commitments to which the Vendors are a
party in connection with the Business or the Purchased Assets to
be assigned to and assumed by Boggs 1998 at the Time of Closing
as set forth in Schedule "E" hereto together with the full
benefit and advantages of all warranties and warranty rights
(implied, expressed or otherwise) against manufacturers or
sellers which apply to any of the Purchased Assets to the extent
that they are assignable by the Vendors, but not including the
Excluded Assets and which include the contracts in respect of the
Leased Equipment;
(i) "Average Trading Price" in respect of a particular date means the
average closing trading price of the Americlean Shares on the most
senior exchange or quotation system on which the Americlean Shares
are traded for the 10 trading days immediately preceding that
particular date;
(j) "Boggs" means Boggs & Company, Inc.;
(k) "Boggs 1998" means Boggs & Company (1998), Inc.;
(l) "Boggs Shares" means the 762 issued and outstanding shares of common
stock of Boggs;
(m) "Books and Records" means all books, records, files, documents and
other written, electronically maintained or computer accessed
information relating to the Business or the Purchased Assets,
including the following
(i) list of customers and suppliers (past, present and
potential),
(ii) price lists,
(iii) records with respect to production, engineering, product
development, costs, inventory, machinery and equipment,
(iv) business development plans,
(v) advertising matter, catalogues, correspondence, mailing lists,
photographs, sales materials and records, purchasing materials
and records,
(vi) personnel records of employees who will be employed by Boggs
1998 following the Time of Closing,
(vii) manufacturing and quality control records and procedures,
(viii) research and development files, records, data and
laboratory books,
(ix) media materials and plates,
(x) sales order and purchase order files,
(xi) information from accounting, tax and litigation files
reasonably requested by the Purchasers from time to time,
<PAGE>
(xii) correspondence files (including correspondence relating to
discounts, rebates, future commitments, product returns,
production errors, standards of any relevant governmental
authority, social service taxes, value added taxes,
environmental legislation and fitness and service warranties
relating to the Purchased Assets), and
(xiii)other records used in or required to continue the Business as
heretofore and presently being conducted by the Vendors
excluding the corporate record books of the Vendors, and their
corporate charters, seals, minute books, and stock transfer books
and where the Vendors are required by law to retain a particular
book, record or file, "Books and Records" shall mean a copy thereof;
(n) "Business" means all aspects of the laundry and dry cleaning
equipment and supply distribution business and repair business
presently conducted by the Vendors under the trade name "Boggs &
Company" and variations thereof;
(o) "Cash" means all cash on hand or on deposit to the credit of the
Vendors on the Closing Date;
(p) "Cash Purchase Price" means collectively the Advance, the Closing
Price and the Hold-back Amount;
(q) "Closing" means the completion, on the Closing Date, of the
transactions contemplated hereby in accordance with Article 13
hereof;
(r) "Closing Date" means the day on which all conditions precedent to
the completion of the transactions as contemplated hereby have been
satisfied or waived; provided that in no event shall the Closing
Date be later than March 3, 1999;
(s) "Closing Price" means the sum of $25,000, less the Transaction
Costs, to be paid by Boggs 1998 to the Vendors at the Time of
Closing;
(t) "Employment Agreements" means collectively the employment agreements
among Boggs 1998 and each of the Covenantors, respectively, to be
entered into pursuant to Article 9 hereof substantially in the form
attached hereto as Schedule "Q";
(u) "Encumbrance" means any mortgage, charge, pledge, hypothecation,
lien, security interest, assignment, option, execution, claim or any
other title defect or other encumbrance of any kind or nature
whatsoever (including any agreement to give any of the foregoing),
whether or not registered or registrable and whether consensual or
arising by operation of law (statutory or otherwise);
(v) "Environmental Audit" means any audit, assessment, study, test
or evaluation performed by an environmental engineer or
consultant or by a governmental or regulatory agency in relation
to the environmental condition of the Leasehold Property and any
air, land surface or subsurface, soil, subsoil, bedrock, surface
water, ground water, fish, plant life, animal life and any other
natural resources comprising the Leasehold Property or located
on, in, above, under or adjacent to or within the immediate
vicinity of the Leasehold Property;
<PAGE>
(w) "Environmental Infractions" means all of the infractions of the
Vendors against the Environmental Laws in respect of the Premises as
set forth in Schedule "J" attached hereto;
(x) "Environmental Laws" means all federal, state and municipal
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, bylaws and regulations, and any
international treaties to which the United States or a state
thereof is a party, relating to the protection of the environment
and governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of
Hazardous Material, including air pollution, water pollution and
noise control and the rules, regulations, policies, guidelines,
interpretations, decisions, orders and directives of any federal,
state and municipal governmental agencies and authorities and
international tribunals having jurisdiction with respect thereto;
(y) "Environmental Permits" means any and all permits, licenses,
approvals, authorizations, consents or registrations required by
any applicable Environmental Law in connection with the
ownership, use and/or operation of the Leasehold Property for the
storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Material or the
sale, transfer or other disposition of the Leasehold Property as
more particularly described in Schedule "K" hereto;
(z) "Equipment" means all machinery, equipment, automobiles, trucks,
trailers, tractors, office equipment, yard equipment, furniture,
furnishings, spare parts, tools, stores and supplies of all kinds
used in connection with the Business including, without
limitation, the machinery, equipment, and other property
described in Schedule "B" hereto, but not including the
machinery, equipment and other property comprised in the Excluded
Assets;
(aa) "Escrow Agent" means the law firm of Godinho, Sinclair of Vancouver,
British Columbia, or such other law firm as the Purchasers and the
Vendors may mutually agree upon;
(bb) "Escrow Agreement" means the escrow agreement among the Purchasers,
the Vendors and the Escrow Agent to be entered into pursuant to
Article 3 hereof substantially in the form attached hereto as
Schedule "R";
(cc) "Excluded Assets" means the following property and assets of the
Vendors pertaining to the Business
(i) all contracts, commitments and engagements with employees
or contracted employees of the Vendors,
(ii) all assets of the Vendors enumerated in Schedule "F" hereto,
and
(iii) all original records relating to any Excluded Assets and all
of the corporate, financial and other records of the Vendors
not pertaining primarily to the Business;
(dd) "Excluded Liabilities" means any and all liabilities of the Vendors
related to the presence of Hazardous Materials or other
environmental contamination on the Premises;
<PAGE>
(ee) "Financial Statements" means collectively the audited financial
statements of the Vendors for the periods ended September 30, 1997
and 1998 and the management prepared financial statements of the
Vendors dated December 31, 1997 and 1998, true copies of which are
attached as Schedule "A" hereto;
(ff) "Goodwill" means the goodwill of the Business together with the
exclusive right of Boggs 1998 to represent itself as carrying on
the Business in succession of the Vendors subject to the terms
hereof and the right to use any words indicating that the
Business is so carried on including the right to use the name
"Boggs & Company" or any variation thereof as part of the name of
or in connection with the Business or any part thereof carried on
or to be carried on by Boggs 1998, the right to all corporate,
operating and trade names associated with the Business, or any
variations of such names as part of or in connection with the
Business, all telephone listings and telephone advertising
contracts, all lists of customers, books and records and other
information relating to the Business, all necessary licenses and
authorizations and any other rights used in connection with the
Business;
(gg) "Guarantees" means all of the guarantees, pledges, sureties and
bonds undertaken by the Covenantors and Gene Rutherford for the
benefit of the Vendors as more particularly described in Schedule
"P" hereto;
(hh) "Hazardous Material" means, without limitation, any radioactive
materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, flammable explosives, radon, petroleum
and petroleum products, methane, perchloroethylene and any other
hazardous materials, hazardous wastes, hazardous or toxic substances
and any substances, materials, liquids or gases regulated under any
applicable Environmental Laws;
(ii) "Hold-back" means the hold-back of the Hold-back Amount and the
Hold-back Shares pursuant to Article 3 hereof;
(jj) "Hold-back Amount" means the sum of $25,000, less the Transaction
Costs, if any, to be delivered by Boggs 1998 to the Escrow Agent at
the Time of Closing;
(kk) "Hold-back Shares" means one half of the Acquisition Shares and
which are to be issued in the name of the Vendors and delivered by
Americlean to the Escrow Agent at the Time of Closing;
(ll) "Indebtedness", in respect of any person, means, at any time and
from time to time, all indebtedness, liabilities and obligations,
absolute or contingent, direct or indirect, due or accruing due,
matured or unmatured, liquidated or unliquidated, of such person;
(mm) "Intangible Assets" means all of the intangible assets of the
Vendors, including, without limitation, the Goodwill, all
trademarks, logos, copyrights, designs, and other intellectual and
industrial property;
(nn) "Inventory" means all inventory and supplies of the Business
existing on the Closing Date;
(oo) "JKG" means JKG Group, Inc.;
(pp) "JKG Shares" means the 950 issued and outstanding shares of
common stock of JKG;
(qq) "Lease Adjustment Agreement" means the lease adjustment agreement to
be entered into among Boggs 1998 and the Covenantors pursuant to
Article 10 hereof substantially in the form attached hereto as
Schedule "S";
<PAGE>
(rr) "Leased Equipment" means all of the machinery and equipment used in
connection with the Business which are subject to leases or
conditional sales contracts as described in Schedule "C";
(ss) "Leasehold Property" means the leases of the leasehold land and
interests therein and all plant, improvements, appurtenances and
fixtures (including fixed machinery and fixed equipment) situated
thereon or forming part thereof used in connection with the Business
described in Schedule "L" hereto, but does not include the lands and
premises comprised in the Excluded Assets;
(tt) "Loss" has the meaning ascribed to it in section 4.4 hereof;
(uu) "Material Contracts" means the burden and benefit of and the
right, title and interest of the Vendors in, to and under all
trade and non-trade contracts, engagements or commitments,
whether written or oral, to which the Vendors are entitled in
connection with the Business whereunder the Vendors are or may
become obligated to pay or entitled to receive the sum of $25,000
or more including, without limitation, any pension plans, profit
sharing plans, bonus plans, loan agreements, security agreements,
indemnities and guarantees, any agreements with employees,
lessees, licensees, managers, accountants, suppliers, agents,
distributors, officers, directors, attorneys or others which
cannot be terminated without liability on not more than one
month's notice, and those contracts listed in Schedule "D" hereto;
(vv) "Option Agreements" means collectively the option agreements among
Americlean and each of the Covenantors, respectively, to be entered
into pursuant to Article 9 hereof substantially in the form attached
hereto as Schedule "Q";
(ww) "Permits" means all licenses, consents, permits, authorities,
certificates and registrations which are required, necessary or
desirable for the conduct in the usual and ordinary course of the
operation of the Business and the ownership or leasing of and the
uses to which the Purchased Assets have been and presently are put;
(xx) "Permitted Encumbrances" means those Encumbrances on the Purchased
Assets and the Business described in Schedule "G" hereto;
(yy) "Place of Closing" means the offices of Culp Elliott and
Carpenter, P.L.L.C. or such other place as the Purchasers and the
Vendors may mutually agree upon;
(zz) "Plan" means the Vendors' profit sharing plan as disclosed in the
Financial Statements into which the sum of $4,517 has been
contributed as at the date hereof;
(aaa) "Premises" means the locations at which the Vendors have conducted
the Business as more particularly enumerated in Schedule "M"
attached hereto;
(bbb) "Prepaid Expenses and Deposits" means the benefit of all expenses
pre-paid by the Vendors and all deposits made by the Vendors,
excluding any such prepaid expenses or deposits comprised in the
Excluded Assets;
(ccc) "Purchase Price" means the purchase price and other consideration to
be paid and given by the Purchasers to the Vendors for the Purchased
Assets as provided for in Article 2 hereof;
<PAGE>
(ddd) "Purchased Assets" means the undertaking and all the property and
assets of the Business of every kind and description wheresoever
situated including, without limitation, the Equipment, the Leased
Equipment, the Inventory, the Assumed Material Contracts, the
Accounts Receivable, the Cash, the Intangible Assets, the Prepaid
Expenses, the Books and Records, the Goodwill and the Leasehold
Property, and all credit cards, charge cards and banking cards
issued to the Vendors but excluding any property or assets of the
Business comprised in the Excluded Assets;
(eee) "Summary of Ongoing Litigation" means the summary of all of the
Vendors' ongoing litigation attached hereto as Schedule "I";
(fff) "Time of Closing" means 10:00 a.m. local time at the Place of
Closing on the Closing Date, or such other time as the Purchasers
and the Vendors may mutually agree upon;
(ggg) "Transaction Costs" has the meaning ascribed to it in section
11.8 hereof; and
(hhh) "Vendor Shares" means collectively the Boggs Shares and the JKG
Shares.
Any other terms defined within the text of this Agreement will have the meanings
so ascribed to them.
Captions and Section Numbers
1.2 The headings and section references in this Agreement are for convenience of
reference only and do not form a part of this Agreement and are not intended to
interpret, define or limit the scope, extent or intent of this Agreement or any
provision thereof.
Extended Meanings
1.3 The words "hereof", "herein", "hereunder" and similar expressions used in
any clause, paragraph, section or Article of this Agreement will relate to the
whole of this Agreement and not to that clause, paragraph, section or Article
only, unless otherwise expressly provided.
Number and Gender
1.4 Whenever the singular or masculine or neuter is used in this Agreement, the
same will be construed to mean the plural or feminine or body corporate where
the context of this Agreement requires.
Section References and Schedules
1.5 Any reference to a particular "Article", "section", "paragraph", "clause" or
other subdivision is to the particular Article, section, clause or other
subdivision of this Agreement and any reference to a Schedule by letter will
mean the appropriate Schedule attached to this Agreement and by such reference
the appropriate Schedule is incorporated into and made part of this Agreement.
The Schedules to this Agreement are as follows:
<PAGE>
Information concerning the Vendors
Schedule "A" Financial Statements
Schedule "B" Equipment
Schedule "C" Leased Equipment
Schedule "D" Material Contracts
Schedule "E" Assumed Material Contracts
Schedule "F" Excluded Assets
Schedule "G" Permitted Encumbrances
Schedule "H" Insurance Policies
Schedule "I" Summary of Ongoing Litigation
Schedule "J" Environmental Infractions
Schedule "K" Environmental Permits, Compliance and Other Matters
Schedule "L" Leasehold Property
Schedule "M" Premises
Schedule "N" Employees
Schedule "O" Bank Accounts
Information concerning the Covenantors
Schedule "P" Guarantees
Agreements
Schedule "Q" Employment Agreements and Option Agreements
Schedule "R" Escrow Agreement
Schedule "S" Lease Adjustment Agreement
Severability of Clauses
1.6 If any part of this Agreement is declared or held to be invalid for any
reason, such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.
Currency
1.7 Unless otherwise specified, all sums referred to herein and all payments to
be made hereunder will be in lawful money of the United States of America.
ARTICLE 2
PURCHASE AND SALE
Purchase and Sale
2.1 Relying on the representations and warranties set forth in this
Agreement, and subject to the terms and conditions hereof, at the Time of
Closing Boggs 1998 will purchase from the Vendors and the Vendors will sell,
assign, transfer and convey to Boggs 1998 the Purchased Assets, free and clear
of all Encumbrances, except the Permitted Encumbrances, in exchange for the
Purchase Price and the additional consideration set forth in this Article 2.
Notwithstanding the foregoing the Purchasers shall not obtain any right, title
or interest in the Excluded Assets.
<PAGE>
Purchase Price
2.2 The Purchase Price payable by the Purchasers hereunder for the Purchased
Assets shall be the aggregate of the following amounts:
(a) the Cash Purchase Price;
(b) that number of Americlean Shares which is equal to $500,000 divided
by the Average Trading Price on the Closing Date (the "Acquisition
Shares"); and
(c) the assumption of all of the duties and obligations of the Vendors
under the Assumed Material Contracts and the Assumed Accounts
Payable and Liabilities .
Consideration
2.5 In consideration of the acquisition of the Purchased Assets from the Vendors
by Boggs 1998, Boggs 1998 agrees to pay the Advance to the Vendors concurrent
with the execution of this Agreement and the Purchasers agree to pay and issue
the following consideration to the Vendors at the Time of Closing:
(a) the Closing Price; and
(b) the Acquisition Shares less the Hold-back Shares.
2.6 In further consideration of the acquisition of the Purchased Assets from the
Vendors by Boggs 1998, the Purchasers agree to deliver to the Escrow Agent at
the Time of Closing and pursuant to the terms of the Escrow Agreement:
(a) the Hold-back Amount; and
(b) the Hold-back Shares, which shall be issued in the name of the
respective Vendors.
Resale of Acquisition Shares
2.7 The Vendors agree that they will not offer, sell or otherwise transfer,
pledge or hypothecate any of the Acquisition Shares (other than pursuant to an
effective Registration Statement under the Securities Act of 1933 (United
States), as amended) directly or indirectly unless:
(a) the sale is to Americlean;
(b) the sale is made pursuant to the exemption from registration under
the Securities Act of 1933 (United States) provided by Rule 144
thereunder; or
(c) the Shares are sold in a transaction that does not require
registration under the Securities Act of 1933 (United States) or any
applicable United States state laws and regulations governing the
offer and sale of securities, and the Vendor selling same has
furnished to Americlean an opinion of counsel to that effect or such
other written opinion as may be reasonably required by Americlean.
<PAGE>
The Vendors acknowledge that the certificates representing the Acquisition
Shares shall bear the following legend:
NO SALE, OFFER TO SALE, OR TRANSFER OF THE SHARES REPRESENTED
BY THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE FEDERAL SECURITIES ACT OF 1933, AS
AMENDED, IN RESPECT OF SUCH SHARES IS THEN IN EFFECT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT IS
THEN IN FACT APPLICABLE TO SAID SHARES.
Allocation between the Vendors
2.8 The Purchase Price shall be allocated and issued to the Vendors on the
following basis:
(a) 77.2% to Boggs; and
(b) 22.8% to JKG.
Allocation of Purchase Price
2.9 The parties hereto agree that that they shall negotiate in good faith to
agree upon a reasonable allocation of the Purchase Price to the assets comprised
in the Purchased Assets as enumerated in paragraph 1.1 (ddd) hereof prior to the
Time of Closing in accordance with s. 1060 of the Internal Revenue Code (United
States).
Assumption of Obligations
2.10 From and after the Closing Date, Boggs 1998 shall:
(a) assume all of the duties and obligations of the Vendors under the
Assumed Material Contracts and the Vendors shall assign all of their
right, title and interest in and to the Assumed Material Contracts
to Boggs 1998; and
(b) assume the Assumed Accounts Payable and Liabilities and the duties
and obligations related thereto.
Obligations not Assumed
2.11 Except as provided in this Agreement, the Purchasers do not assume and
shall not be liable for any duties, obligations, commitments or liabilities of
the Vendors or the Covenantors whatsoever, and without limiting the generality
of the foregoing and notwithstanding any other provision hereof, the Purchasers
do not assume and shall not be liable for the following duties, obligations,
commitments or liabilities of the Vendors or the Covenantors:
(a) any taxes and related interests, assessments or penalties under the
tax legislation of any jurisdiction having authority, including any
obligation recorded on the Financial Statements and denoted as
deferred income taxes; and
(b) the payment of any and all wages, salaries and bonuses, pension plan
payments, all amounts due in lieu of holiday pay and other benefits
to the employees listed on Schedule "N" hereto up to and including
the Closing Date.
<PAGE>
and the Vendors and Covenantors hereby agree to jointly and severally indemnify
and save harmless the Purchasers from and against all such duties, obligations,
commitments and liabilities.
ARTICLE 3
HOLD-BACK
3.1 Pursuant to Article 2 hereof, the Purchasers shall deliver to the Escrow
Agent the Hold-back Amount and the Hold-back Shares and the parties hereto agree
that the Hold-back Amount and the Hold-back Shares shall be applied pursuant to
section 4.4 hereof, subject to the restrictions contained therein, and dealt
with as follows:
(a) the Hold-back Amount and the Hold-back Shares shall be held by the
Escrow Agent pursuant to the terms of the Escrow Agreement and shall
not be released by the Escrow Agent until such time as the Escrow
Agent has received a written direction from both Americlean and the
Vendors in respect of the disposition of the Hold-back Amount and
the Hold-back Shares;
(b) in the event that neither Americlean, the Vendors nor the
Covenantors has received any notice, written or otherwise, of any
Loss on or before the date which is six (6) months from the Closing
Date, Americlean and the Vendors shall forthwith deliver to the
Escrow Agent a written direction to deliver the Hold-back Amount to
the Vendors allocated pursuant to section 2.8 hereof;
(c) in the event that neither Americlean, the Vendors nor the
Covenantors have received any notice, written or otherwise, of any
Loss on or before the date which is one (1) year from the Closing
Date, Americlean and the Vendors shall forthwith deliver to the
Escrow Agent a written direction to deliver the Hold-back Shares to
the Vendors allocated pursuant to section 2.8 hereof;
(d) in the event that either Americlean, the Vendors or the
Covenantors receive any notice, written or otherwise, of a Loss the
parties hereto agree that the Hold-back Amount then held by the
Escrow Agent together with the Hold-back Shares shall continue to be
held by the Escrow Agent pending resolution of the Loss pursuant to
sections 4.4 and 4.5 hereof and the parties hereto further agree in
good faith to take all such steps as may be necessary or incidental
to such removal. In the event that the Purchasers and the Vendors
have not reached an agreement in respect of such Loss within sixty
(60) days of the date of receipt of a notice of such Loss and do not
mutually deliver to the Escrow Agent a written direction in respect
of the disposition of the Hold-back Amount and the Hold-back Shares
then held by the Escrow Agent, the parties hereto agree to refer the
dispute as to the disposition of the Hold-back Amount and the
Hold-back Shares then held by the Escrow Agent to arbitration in
accordance with section 15.1 hereof. In addition, the Vendors and
the Purchasers agree that where such Loss is to be dealt with by a
payment by the Vendors to the Purchasers, the Hold-back Shares shall
be valued at the Average Trading Price on the date on which notice
of the Loss is first received by either the Purchasers, the Vendors
or the Covenantors, as applicable, and shall be returned to
Americlean at such times as permitted under applicable securities
laws to the extent necessary to fund such payment (the "Returned
Shares"), and only in the event that the value of the Returned
Shares is insufficient to fund such payment will the Purchasers draw
upon the Hold-back Amount then held by the Escrow Agent;
(e) in any event Americlean and the Vendors shall deliver to the Escrow
Agent a written direction to deliver all the Hold-back Shares to the
Vendors no later than one (1) year from the Closing Date unless
there is a bona fide dispute between Americlean and the Vendors in
respect of the Hold-back Shares;
<PAGE>
(f) the Hold-back Shares shall be shown as issued to the Vendors and
outstanding on Americlean's balance sheet and such Hold-back Shares
shall be legally outstanding; and
(g) as long as any of the Hold-back Shares remain deposited with the
Escrow Agent, the Vendors shall be entitled to vote the Hold-back
Shares and receive dividends thereon but may not otherwise deal with
the Hold-back Shares.
3.2 The parties hereto agree that the rights of the Purchasers pursuant to
this Agreement shall in no way be limited to the Hold-back Amount and the
Hold-back Shares.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE VENDORS AND THE COVENANTORS
Representations and Warranties
4.1 Each of the Vendors and the Covenantors jointly and severally represents and
warrants to the Purchasers, with the intent that the Purchasers will rely
thereon in entering into this Agreement and in completing the transactions
contemplated hereby, that:
The Vendors - Corporate Status and Capacity
(a) Incorporation. The Vendors are corporations duly incorporated and
validly subsisting under the laws of North Carolina and Florida, and
are in good standing with the office of respective Secretary of
State having jurisdiction over the Vendors;
(b) Non-Reporting. The Vendors are not reporting or public companies
under the laws of the United States of America nor of any other
jurisdiction;
(c) Carrying on Business. The Vendors carry on business in the
States of North Carolina, South Carolina, Virginia, Tennessee,
Georgia and Florida and do not carry on any material business
activity in any other jurisdiction. The Vendors have offices in
Charlotte, North Carolina, St. Petersburg, Florida and in no
other locations and are duly authorized to carry on business in
such states. Neither the ownership of the Purchased Assets nor
the nature of the Business requires the Vendors to register or
otherwise be qualified to carry on business in any other
jurisdiction;
(d) Corporate Capacity. Except as disclosed in this Agreement, the
Vendors have the full corporate power, right, capacity and authority
to own, lease and dispose of the Purchased Assets, to carry on the
Business as now being conducted by them, to enter into and complete
this Agreement, to complete the transactions contemplated hereby and
to duly observe and perform all of their covenants and obligations
set forth herein;
<PAGE>
The Vendors - Records and Financial Statements
(e) Charter Documents. The charter documents of the Vendors have not
been altered since the incorporation of the Vendors, except as filed
in the record books of the Vendors;
(f) Books and Records. The Books and Records fairly and correctly set
out and disclose in all material respects the financial position of
the Vendors, and all material financial and other transactions of
the Vendors relating to the Business, including any and all Material
Contracts and any amendments thereto, have been accurately recorded
or filed in such books and records;
(g) Financial Statements. As at the date of this Agreement, the
Vendor Financial Statements dated September 30, 1998 are, and to
the best of the Vendors' knowledge, information and belief the
management prepared financial statements of the Vendors dated
December 31, 1997 and 1998 are, true and correct and present
fairly and correctly the assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Vendors as of the
respective dates thereof and the sales and earnings of the
Business during the periods covered thereby, in all material
respects, and have been prepared in substantial accordance with
generally accepted accounting principles consistently applied;
(h) Accounts Receivable. All Accounts Receivable are bona fide and
are good and collectible without, to the knowledge and belief of
the Vendors, set-off or counterclaim, except as disclosed in
Schedule "G" hereto; provided that the term "good and
collectible" as used herein is not to be interpreted to mean that
a Vendor warrants that a particular account receivable will
actually be collected and in such instance such non-collection
shall not render the Financial Statements inaccurate nor
constitute a breach of the Vendors' representations and
warranties with respect thereto;
(i) Bank Accounts. All bank accounts, and the identity of those
individuals who have signing authority in respect thereof, which are
in the names of the Vendors and relating to the Business or used in
connection with the Business, whether or not in the name of the
Business, are set forth in Schedule "O" attached hereto;
(j) No Ownership of Companies. The Vendors do not own any subsidiary and
do not otherwise own, directly or indirectly, any shares or interest
in any other corporation, partnership, joint venture or firm other
than as described herein;
Material Contracts
(k) Material Contracts. The contracts listed in Schedule "D"
constitute all of the Material Contracts of the Vendors;
(l) No Default. There has not been any default in any material
obligation of either of the Vendors or, to the knowledge of the
Covenantors any other party to be performed under any of the
Material Contracts, each of which is in good standing and in full
force and effect and unamended, and the Vendors and the Covenantors
are not aware of any default in the obligations of any other party
to any of the Material Contracts;
(m) No Compensation on Termination. There are no agreements, commitments
or understandings relating to severance pay or separation allowances
on termination of employment of any employee of the Vendors other
than as referred to herein. The Vendors are not obliged to pay
benefits or share profits with any employee after termination of
employment except as required by law other than as referred to
herein;
<PAGE>
The Vendors - Employees
(n) Employees. The names of all of the employees of the Vendors employed
in connection with the Business and such employees' respective job
titles, rates of pay, length of employment with the Vendors,
benefits and annual vacation entitlement are enumerated in Schedule
"N" attached hereto;
(o) Employment Arrangements. There is no employment contract,
commitment or arrangement, whether written, oral or implied,
relating to the Business which contains any specific agreement as
to notice of termination or severance pay in lieu thereof or
which cannot be terminated without cause upon giving reasonable
notice as may be implied by law without the payment of, or any
Indebtedness in respect of, any bonus, damages, share or profits
or penalty, except as enumerated in Schedule "N" attached hereto;
(p) Vacations and Overtime. The Books and Records accurately set out all
banked vacation entitlement, regular and supplementary vacation pay,
banked and deferred overtime compensation, time-off entitlement,
severance and retirement benefits and any other emoluments or
benefits due or accruing to all employees employed in the Business;
(q) Labour Matters. Neither of the Vendors is a party to any collective
agreement relating to the Business with any labour union or other
association of employees and no part of the Business has been
certified as a unit appropriate for collective bargaining or, to the
knowledge of the Covenantors and the Vendors, has made any attempt
in that regard;
The Vendors - Employee Benefit Plans
(r) No Separation. The Plan does not obligate the Vendors to pay
separation, severance, termination or similar-type benefits solely
as a result of any transaction contemplated by this Agreement or
solely as a result of a "change of control" as such term as used in
Section 280G of the Internal Revenue Code of 1986, as amended, and
the regulation promulgated thereunder (the "Code");
(s) Maintenance. The Plan and all related trusts, insurance
contracts, and funds have been maintained, funded and
administered in compliance in all respects with all applicable
laws and regulations, including but not limited to the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA") and
the Code. None of the Vendors, any trustee or administrator of
the Plan, or any other person in respect of the Plan which could
subject the Vendors, or any trustee or administrator thereof, or
any party dealing with the Plan, of the Purchasers to any tax or
penalty imposed by the ERISA of the Code. None of the assets of
the Vendors is the subject of any lien arising under Section
302(f) of the ERISA or Section 412(n) of the Code, the Vendors
have not been required to post any security pursuant to Section
307 of the ERISA or Section 401(a)(29) of the Code, and neither
Vendors nor any director or officer of the Vendors has knowledge
of any facts which could be expected to give rise to such lien or
such posting of security;
<PAGE>
(t) No Unfunded Defined Benefit Plan. No unfunded "defined benefit
plan" (as such term is defined in Section 3(35) of the ERISA has
been, during the five years preceding the Closing Date,
transferred out of the controlled group of companies (within the
meaning of Sections 414(b), (c) and (m) of the Code) and which
either of the Vendors is a member or was a member during such
five year period. With respect to the Plan, all required or
recommended payments, premiums, contribution, reimbursements or
accruals for all periods ending prior to or as of the Closing
Date have been made. The Plan does not have an unfunded
liability;
The Vendors - Related Party Debt
(u) No Debt to Related Parties. The Vendors are not now, and on Closing
will not be, materially indebted to any of the Covenantors nor to
any family member of any of the Covenantors, nor to any affiliate of
the Covenantors except as set forth in Schedule "G" hereto;
(v) No Related Party Debt to the Vendors. None of the Covenantors is now
nor on Closing will be indebted to or under any financial obligation
to the Vendors on any account whatsoever, except for advances on
account of travel and other expenses not exceeding $5,000 in total;
The Business
(w) No Dividends. No dividends or other distributions on any shares in
the capital of the Vendors have been made, declared or authorized
since the date of the most recently prepared Financial Statements;
(x) No Payments. No payments of any kind have been made or authorized
since the date of the most recently prepared Financial Statements to
or on behalf of the Vendors or to or on behalf of officers,
directors, shareholders or employees of the Vendors or under any
management agreements with the Vendors, except payments made in the
ordinary course of business and at the regular rates of salary or
other remuneration payable to them;
(y) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting the Vendors other than the Plan;
(z) Maintenance of Business. Since the date of the most recently
prepared Financial Statements
(i) except as disclosed to Americlean in writing prior to the
date hereof, there has been no material change in any of
the Purchased Assets or the organization, operations,
affairs, business, properties, prospects or financial
condition or position of the Business (excluding trends
identified to the Purchasers prior to the date hereof),
including changes arising as a result of any legislative or
regulatory change, revocation of any license, Permit or
right to do business, or any change in any Indebtedness of
the Business or any of the Purchased Assets, other than
changes in the usual and ordinary course of the operation
of the Business, none of which changes have materially and
adversely affected any of the Purchased Assets or the
organization, operations, affairs, business, properties,
prospects or financial condition or position of the
Business,
<PAGE>
(ii) there has been no act of God, damage, destruction, loss, fire,
explosion, accident, casualty, labour disruption or trouble,
or other event (whether or not covered by insurance)
materially and adversely affecting any of the Purchased Assets
or the organization, operations, affairs, business,
properties, prospects or financial condition or position of
the Business,
(iii) to the knowledge of the Vendors and the Covenantors no event
has occurred which the Vendors and the Covenantors, acting
reasonably, could believe would lead to a reduction in the
value of the Goodwill,
(iv) the Vendors have not, directly or indirectly, materially
increased or agreed to increase the salary, pay, fringe
benefits or other compensation of, or paid or agreed to pay
any pension, bonus, share or profits or other benefit,
compensation or payment to, or for the benefit of, any
officers, employees or agents of the Business, save and
except remuneration paid to employees of the Business in
the usual and ordinary course of the operation of the
Business and save and except increases agreed to in writing
by the Purchasers,
(v) the Vendors have maintained in force insurance against
loss on such of the Purchased Assets against such risks
with such limits and insurance against public liability
from such risks with such limits as in accordance with
prudent business practices prevailing in the industry in
which the Business is involved and having regard to the
location, age and character of the Purchased Assets and has
materially complied fully with all requirements of such
insurance, including the prompt giving of any notice of any
claim or possible claims thereunder,
(vi) the Vendors have carried on the Business in the usual and
ordinary course and the Vendors have not entered into any
material agreement or commitment except in the ordinary
course,
(vii) the Vendors have not, directly or indirectly, purchased or
agreed to purchase or leased or agreed to lease or acquired or
agreed to acquire any asset, other than as required in the
usual and ordinary course of the operation of the Business,
(viii)the Vendors have not, directly or indirectly, sold,
transferred, disposed of, mortgaged, pledged, charged or
leased any asset, other than as required in the usual and
ordinary course of operation of the Business,
(ix) the Vendors have not, directly or indirectly, engaged or
entered in any transaction or made any disbursement or
assumed or incurred any liability or obligation or made any
commitment to make any expenditure which might materially
and adversely affect any of the Purchased Assets or the
organization, operations, affairs, business, properties,
prospects or financial condition or position of the
Business, and
(x) no capital expenditures in excess of $10,000 individually or
$30,000 in total have been authorized or made;
<PAGE>
(aa) No Adverse Information. Except as disclosed in this Agreement
or to Americlean in writing prior to the Closing Date, neither of
the Vendors nor any of the Covenantors has any information or
knowledge of any fact relating to the Business, the Purchased
Assets or any Indebtedness of the Business or the transactions
contemplated hereby which might reasonably be expected to affect,
materially and adversely, any of the Purchased Assets or the
organization, operations, affairs, business, properties,
prospects or financial condition or position of the Business;
(bb) Forward Sales. All outstanding forward commitments by or on behalf
of the Vendors for the purchase or sale of the Inventory have been
made in accordance with established price lists of the Vendors or
its suppliers, or if otherwise, then in accordance with the Vendors'
normal business custom in varying therefrom;
The Vendors - Income Tax Matters
(cc) Tax Returns. All tax returns and reports of the Vendors required by
law to be filed have been filed and are substantially true, complete
and correct, and any taxes payable in accordance with any return
filed by the Vendors or in accordance with any notice of assessment
or reassessment issued by any taxing authority have been so paid;
(dd) Current Taxes. Adequate provisions have been made for taxes
payable for the current period for which tax returns are not yet
required to be filed and there are no agreements, waivers, or
other arrangements providing for an extension of time with
respect to the filing of any tax return by, or payment of, any
tax, governmental charge or deficiency by the Vendors. Neither
of the Vendors nor any of the Covenantors are aware of any
contingent tax liabilities or any grounds which would prompt a
reassessment including aggressive treatment of income and
expenses in filing earlier tax returns;
The Vendors - Applicable Laws and Legal Matters
(ee) Licenses. To the best of the knowledge, information and belief of
the Vendors, the Vendors hold all Permits as may be requisite for
carrying on the Business in the manner in which it has heretofore
been carried on, which Permits have been maintained and continue to
be in good standing;
(ff) Applicable Laws. Except as disclosed in this Agreement, the
Vendors have not been charged with or received notice of breach
of any laws, ordinances, statutes, regulations, by-laws, orders
or decrees to which they are subject or which apply to them the
violation of which would have a material adverse effect on the
Vendors, and the Vendors are not in breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees the
contravention of which would result in a material adverse impact
on the Business, such compliance to be construed with reference
to similar businesses similarly situated;
(gg) Pending or Threatened Litigation. There is no material
litigation or administrative or governmental proceeding or
inquiry pending or threatened against or relating to the Vendors,
the Business, or any of the Purchased Assets, nor do the Vendors
have any knowledge of any deliberate act or omission of the
Vendors that would form any material basis for any such action,
proceeding or inquiry, other than as disclosed in Schedule "I"
hereto;
(hh) Ongoing Litigation. The Summary of the Ongoing Litigation
presented in Schedule "I" hereto is true and correct and presents
fairly and correctly the status of the ongoing litigation of the
Vendors as at the date hereof;
<PAGE>
(ii) No Bankruptcy. Neither of the Vendors has made any voluntary
assignment or proposal under applicable laws relating to insolvency
and bankruptcy and no bankruptcy petition has been filed or
presented against either of the Vendors and no order has been made
or a resolution passed for the winding-up, dissolution or
liquidation of either of the Vendors;
(jj) Finder's Fees. The Vendors are not party to any agreement which
provide for the payment of finder's fees, brokerage fees,
commissions or other fees or amounts which are or may become payable
to any third party in connection with the execution and delivery of
this Agreement and the transactions contemplated herein except as
set forth in Schedule "D" hereto;
(kk) Authorizations and Approvals. To the knowledge of the Vendors
and the Covenantors and except as enumerated in this Agreement no
authorization, approval, order, license, permit, consent,
certificate or registration of any governmental authority, court
or arbitrator, and no registration, declaration or filing by the
Vendors or the Covenantors with any governmental authority, court
or arbitrator, is required in order for the Vendors and the
Covenantors
(i) to incur the obligations expressed to be incurred by the
Vendors and the Covenantors in or pursuant to this
Agreement,
(ii) to execute and deliver all other documents and instruments to
be delivered by the Vendors or the Covenantors pursuant to
this Agreement,
(iii) to duly perform and observe the terms and provisions of this
Agreement, or
(iv) to render this Agreement legal, valid, binding and
enforceable;
Execution and Performance of Agreement
(ll) Authorization and Enforceability. except as disclosed in this
Agreement the execution and delivery of this Agreement, and the
completion of the transactions contemplated hereby, have been
duly and validly authorized by all necessary corporate action on
the part of the Vendors and this Agreement constitutes a legal,
valid and binding obligation of each of the Vendors and the
Covenantors and is enforceable against each of them in accordance
with its terms;
(mm) No Violation or Breach. The performance of this Agreement will
not
(i) violate the charter documents of either of the Vendors or
result in any breach of, or default under, any loan agreement,
mortgage, deed of trust, or any other agreement to which the
Vendors or the Covenantors, or any of them, is a party,
(ii) to the knowledge of the Vendors and the Covenantors, give any
person any right to terminate or cancel any agreement
including, without limitation, the Material Contracts, or any
right or rights enjoyed by the Vendors,
(iii) to the knowledge of the Vendors and the Covenantors result in
any alteration of the Vendors' obligations under any agreement
to which the Vendors or any of them are party including,
without limitation, the Material Contracts,
(iv) to the knowledge of the Vendors and the Covenantors result in
the creation or imposition of any Encumbrance or restriction
of any nature whatsoever in favour of a third party upon or
against the Purchased Assets,
<PAGE>
(v) result in the imposition of any tax liability to the Vendors
which would create an Encumbrance on the Purchased Assets, or
(vi) violate any Court order or decree to which the Vendors and the
Covenantors or any of them are subject
except as set forth in this Agreement or the Schedules hereto;
(nn) No Untrue Statements. This Agreement does not contain any
untrue statement by the Vendors or the Covenantors of a material
fact nor have the Vendors and the Covenantors omitted to state in
this Agreement a material fact necessary in order to make the
statements contained herein not misleading, no certificate
furnished by or on behalf of the Vendors or the Covenantors to
the Purchasers at the Time of Closing in respect of the
representations, warranties or covenants of the Vendors and the
Covenantors contained in this Agreement will contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not misleading
and all information set out in the Schedules to this Agreement is
accurate and correct in every material respect;
The Purchased Assets - Ownership and Condition
(oo) Business Assets. Excluding the Excluded Assets, the Purchased
Assets comprise all of the rights, assets and properties that are
usually and ordinarily used or held for use in connection with or
otherwise relate to the operation of the Business in the usual
and ordinary course, the Purchased Assets include all rights,
assets and properties the use and exercise of which are necessary
for the performance of any agreement contemplated by this
Agreement to be assumed by Boggs 1998 and the conduct of the
Business as now conducted and presently proposed by the Vendors
to be conducted, and none of the Vendors nor any other person,
firm or corporation owns any assets used by the Vendors in
operating the Business, whether under a lease, rental agreement
or other arrangement, except as disclosed in Schedules "C" or "D"
hereto;
(pp) No Encumbrances. Other than the Assumed Accounts Payable and
Liabilities and the indebtedness of the Vendors to the CIT
Group/Credit Finance, Inc., there is no indebtedness to any
person which does, by operation of law or otherwise, now or
hereafter constitute or be capable of forming an Encumbrance,
except a Permitted Encumbrance, upon any of the Purchased Assets
and, save as aforesaid, there is no Indebtedness of any kind
whatsoever relating to the Business in respect of which the
Purchasers may become liable on or after the Closing Date;
(qq) Location. All of the Purchased Assets are in the Vendors'
possession at the Premises;
(rr) Condition. All tangible rights, assets and properties comprising the
Purchased Assets are, considered as a whole, in good condition and
repair and (where applicable) are in proper working order, ordinary
wear and tear excepted, having regard to the use and age thereof;
(ss) No Option. No person, firm or corporation has any agreement or
option or a right capable of becoming an agreement for the
purchase of any of the Purchased Assets;
<PAGE>
(tt) Insurance. The Vendors maintain the public liability insurance
and insurance against loss or damage to the Purchased Assets and
the Business as described in Schedule "H" hereto;
The Purchased Assets - Equipment
(uu) Equipment. The Equipment has been maintained in a manner
consistent with that of a reasonably prudent owner;
(vv) Leased Equipment. The Leased Equipment is leased by the Vendors
on normal business terms from persons with whom the Vendors deal
at arm's length and are in the Vendors' possession at the
Premises;
The Purchased Assets - Goodwill and Other Assets
(ww) Goodwill. The Vendors carry on the Business only under the name
"Boggs & Company", "JKG Group, Inc.", and variations thereof and
under no other business or trade names. The Vendors have the
legal right to use one or both of their corporate names in the
States of North Carolina, South Carolina, and Florida and to the
knowledge of the Vendors and the Covenantors Virginia, Tennessee
and Georgia and neither of the Vendors nor any of the Covenantors
is aware of any names similar to Boggs & Company or JKG Group,
Inc. in use in any areas where the Business is conducted. None of
the Vendors or the Covenantors has any knowledge of any
infringement by the Vendors of any patent, trademark, copyright
or trade secret;
Environmental Compliance
(xx) Leasehold Property Use. Neither the Leasehold Property nor, to
the knowledge of the Vendors and the Covenantors, any property
adjacent to or within the immediate vicinity of the Leasehold
Property is being or has been used for the storage, treatment,
generation, transportation, processing, handling, production or
disposal of any Hazardous Material or as a landfill or other
waste disposal site, or for military purposes, other than as
disclosed in Schedule "J" hereto;
(yy) Storage Tanks. No underground storage tanks are or have ever
been located on the Leasehold Property, other than as disclosed
in Schedule "J" hereto;
(zz) Condition of Leasehold Property. The soil, subsoil, bedrock,
surface water and ground water of the Leasehold Property are free
of any Hazardous Material other than as disclosed in Schedule "J"
hereto;
(aaa) No Release of Hazardous Materials. There has been no release nor is
there the threat of any release of any Hazardous Material on, at or
from the Leasehold Property or, to the knowledge of the Vendors and
the Covenantors, any property adjacent to or within the immediate
vicinity of the Leasehold Property which through soil, subsoil,
bedrock, surface water or ground water migration could come to be
located on the Leasehold Property, and neither the Vendors nor the
Covenantors have received any form of notice or inquiry from any
federal, state or municipal governmental agency or authority, any
operator, tenant, subtenant, licensee or occupant of the Leasehold
Property or, to the knowledge of the Vendors or the Covenantors, any
property adjacent to or within the immediate vicinity of the
Leasehold Property or any other person with respect to a release or
the threat of a release of any Hazardous Material on, at or from the
Leasehold Property or any property adjacent to or within the
immediate vicinity of the Leasehold Property other than as disclosed
in Schedule "J" hereto;
<PAGE>
(bbb) No Legal Proceedings. There are no actions, suits, claims or
proceedings, whether pending or threatened against or materially
adversely affecting, or which could materially adversely affect, the
Leasehold Property or the Purchased Assets that arise out of, relate
to or result from
(i) a violation or alleged violation of any applicable
Environmental Laws or non-compliance or alleged non-compliance
with any Environmental Permits,
(ii) the presence of any Hazardous Material or a release or the
threat of a release of any Hazardous Material on, at or from
the Leasehold Property or any property adjacent to or within
the immediate vicinity of the Leasehold Property, or
(iii) human exposure to any Hazardous Material or noises, vibrations
or nuisances of any kind to the extent that they arise from
the condition of the Leasehold Property or the ownership, use,
operation, sale or other disposition of the Leasehold Property
other than as disclosed in Schedule "J" hereto;
(ccc) Environmental Permits. All Environmental Permits required by the
Vendors in connection with the use of the Leasehold Property and the
operation of the Business have been obtained by the Vendors and are
in full force and effect, and there are no outstanding orders,
notices or similar requirements related thereto issued by any
federal, state, municipal, foreign or international government or
regulatory body under any applicable Environmental Laws with respect
thereto other than as disclosed in Schedule "J" hereto. Attached
hereto as Schedule "K" is a true and complete list of all
Environmental Permits necessary or reasonably required by the
Vendors to own and operate the Leasehold Property and to conduct the
Business in the manner in which the Vendors are presently conducting
same;
(ddd) Compliance with Environmental Laws. The Vendors are using the
Leasehold Property and conducting the Business in compliance with
all Environmental Laws, and the Vendors have never been convicted
of, nor charged with, any offense for non-compliance with any
Environmental Laws, nor defaulted in reporting to the appropriate
governmental or regulatory authority on the release of any
Environmental Material or the occurrence of any event which is
required to be reported under any Environmental Laws other than as
disclosed in Schedule "K" hereto;
(eee) Documents and Records. The Vendors have maintained all
documents and records relating to its operation of the purchased
business and the ownership of the Leasehold Property in full
compliance with all Environmental Laws; and
(fff) No Environmental Audit. Neither the Vendors nor the Covenantors have
ever conducted or caused to be conducted an Environmental Audit nor,
to the knowledge of the Vendors, has the Leasehold Property ever
been the subject of an Environmental Audit other than as disclosed
in Schedule "J" hereto.
<PAGE>
Representations and Warranties in Closing Documents
4.2 All statements contained in any certificate or other instrument delivered by
or on behalf of the Vendors or the Covenantors pursuant hereto or in connection
with the transactions contemplated hereby shall be deemed to be representations
and warranties by the Vendors and the Covenantors hereunder.
Non-Merger and Survival
4.3 Unless otherwise stated herein, the representations and warranties of the
Vendors and the Covenantors contained herein will be true at and as of the Time
of Closing in all material respects as though such representations and
warranties were made as of such time. Notwithstanding the completion of the
transactions contemplated hereby, the waiver of any condition contained herein
(unless such waiver expressly releases a party from any such representation or
warranty) or any investigation made by the Purchasers, the representations and
warranties of the Vendors and the Covenantors shall survive the Closing and will
remain in full force and effect for a period of two (2) years thereafter.
Indemnity
4.4 The Vendors and the Covenantors jointly and severally agree to indemnify and
save harmless the Purchasers from and against any and all claims, demands,
actions, suits, proceedings, assessments, judgments, damages, costs, losses and
expenses, including any payment made in good faith in settlement of any claim
(subject to the right of the Vendors and the Covenantors to defend any claim as
herein provided), resulting from the breach by any of them of any representation
or warranty of such party under this Agreement or from any material
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by the Vendors or the Covenantors to the Purchasers
(a "Loss"), subject to the following qualifications and limitations:
(a) the Purchasers must give written notice of the Loss to the Vendors
or the Covenantors or any of them setting forth the nature of the
Loss on or before the date which is two (2) years from the Closing
Date;
(b) the Purchasers shall not make any claim against any Vendor or
Covenantor for any indemnification pursuant to this section 4.4
unless and until the aggregate liability therefore of any or all the
Vendors and Covenantors combined exceeds $35,000 in the aggregate
and the Purchasers further agree that in such event the Purchasers
shall be entitled to such indemnification only for liability in
excess of $20,000; and
(c) the liability of a particular Vendor or Covenantor for a Loss is
limited in all instances, except as specifically provided below
in this paragraph (c), to 100% of the value of the total
consideration received by that particular Vendor or Covenantor
directly or indirectly as a holder of Vendor Shares, from the
Purchasers (and for the purpose of determining such value, each
of the Americlean Shares so received shall have a deemed value
equal to the Average Trading Price at the time at which the
Vendors or Covenantors or any of them are notified of the said
Loss notwithstanding their value at the Time of Closing);
provided further that the liability of a particular Vendor or
Covenantor for a Loss shall not be limited, nor shall paragraph
(b) of this section 4.4 apply, if such Loss arises from any bad
faith and willful omission to disclose any material information
or fact concerning a matter which is actually known to that
particular Vendor or Covenantor, or a breach of any
representation and warranty of that particular Vendor or
Covenantor set forth in paragraphs 4.1 (cc), (dd), (jj), (kk),
and (pp) hereof.
<PAGE>
Notice and Defense of Third Party Claims
4.5 If any action, claim or proceeding shall be brought or asserted under
section 4. 4 against the Purchasers in respect of which indemnity is claimed due
hereunder from the Vendors and the Covenantors or any of them (such of the
Vendors or the Covenantors against whom a claim of indemnity is made being
referred to in this section 4.5 individually as an "Indemnitor" and collectively
as the "Indemnitors"), the Purchasers shall give prompt written notice of such
action or claim to the Indemnitors, together with copies of all material
documents, correspondence and pleadings in connection therewith. If the
Indemnitors consider such claim to be a claim for which the Indemnitors are
required to indemnify the Purchasers, the Indemnitors shall assume the defense
thereof including the employment of counsel satisfactory to the Purchasers,
acting reasonably, and the payment of all expenses related thereto; provided
that no delay or failure to so notify any Indemnitor shall relieve such
Indemnitor of his obligations hereunder except to the extent, if at all, that he
is prejudiced by reason of such delay or failure. The Purchasers shall have the
right to employ separate counsel in any of the foregoing actions, claims or
proceedings and to participate in the defense thereof at their own expense;
provided that if the Purchasers are named as parties and the Purchasers shall in
good faith determine that representation of the Purchasers and the Indemnitors
by the same legal counsel is inappropriate, the Purchasers may engage
independent counsel whose fees and expenses shall be borne by the Indemnitors if
the Indemnitors are determined to be liable to the Purchasers under their
indemnity. If the Indemnitors, or any of them, within ten (10) days after
receipt of notice of any such action or claim, fail to assume the defense
thereof, the Indemnitors shall be deemed to have given notice to the Purchasers
that the Indemnitors do not consider the claim or action to be one for which
they are obligated to indemnify the Purchasers hereunder. Thereupon, the
Purchasers shall have the right, but not the obligation, to undertake the
defense, compromise or settlement of such action, claim or proceeding in their
own names, subject to the right of the Indemnitors or any of them to assume the
defense of such action, claim or proceeding with counsel reasonably satisfactory
to the Purchasers at any time, prior to the settlement, compromise or final
determination thereof. If the Indemnitors do not undertake the defense,
compromise or settlement of such action, claim or proceeding, they shall not be
entitled to challenge the validity or merits of such proceedings, settlement or
compromise in any subsequent arbitration proceedings to determine the liability
of the Indemnitors in any claim of indemnity by the Purchasers hereunder,
provided that the Purchasers have acted reasonably and in good faith in the
defense, compromise or settlement of such action. If the Purchasers undertake
the defense of such action or claim and believe in good faith that the
Purchasers have a valid claim against the Indemnitors or any of them in
connection therewith under the indemnity provisions of this Agreement, then
notwithstanding section 15.1 hereof the Purchasers may, but shall not be
obliged, to join the Indemnitors or any of them as parties to the proceedings
brought by the third party claimant against the Purchasers. If the Indemnitors
or any of them are not named as parties to those proceedings, or if they are so
named but there is no determination as to the issue of the liability of the
Indemnitors or any of them to the Purchasers in those proceedings, then the
Purchasers or the Indemnitors or any of them may refer the dispute as to the
liability of the Indemnitors or any of them to the Purchasers under the
indemnity provisions hereof to arbitration in accordance with section 15.1
hereof. Anything in this section 4.5 to the contrary notwithstanding, the
Vendors shall not, without the Purchasers' prior written consent, which consent
shall not be unreasonable withheld, settle or compromise any action or claim or
consent to the entry of any judgment with respect to any action, claim or
proceeding for anything other than monetary damages paid by the Vendors,
provided that the Vendors may, without the Purchasers' prior written consent,
settle or compromise any such action, claim or proceeding or consent to entry of
any judgment with respect to any such action or claim that requires solely the
payment of monetary damages by the Vendors and that includes as an unconditional
term thereof the full and final release by the claimant or the plaintiff of the
Purchasers from all liability in respect of such action, claim or proceeding.
<PAGE>
ARTICLE 5
COVENANTS OF THE VENDORS AND THE COVENANTORS
Covenants
5.1 The Vendors and the Covenantors jointly and severally covenant and agree
with the Purchasers that from and after the date of execution of this Agreement
to the Closing Date:
(a) as soon as any of the Vendors or the Covenantors has determined that
a state of facts exists which results in or is reasonably likely to
result in
(i) a representation or warranty contained in section 4.1 hereof
being untrue or incorrect in any material respect,
(ii) the non-fulfillment of any of the conditions precedent set
forth in section 11.1 hereof, or
(iii) any change in any of the Purchased Assets or the organization,
operations, affairs, business, properties, prospects or
financial condition or position of the Business, including
changes arising as a result of any legislative or regulatory
change, revocation of any license, Permit or right to do
business, or any change in any Indebtedness of the Business or
any of the Purchased Assets, other than changes in the usual
and ordinary course of the operation of the Business, which
taken as a whole, materially and adversely affects any of the
Purchased Assets or the organization, operations, affairs,
business, properties, prospects or financial condition or
position of the Business
the Vendors and the Covenantors will notify the Purchasers of
such state of facts;
(b) except with the prior written consent of the Purchasers, neither the
Vendors nor the Covenantors will willfully do or fail to do anything
that would result in any of the representations and warranties set
forth in section 4.1 hereof not being true and correct in all
material respects at the time of Closing;
(c) the Vendors and the Covenantors will cooperate in good faith with
the Purchasers to obtain any release, waiver, consent or approval
that the Purchasers, acting reasonably, may advise is required in
order that none of the execution and delivery of this Agreement, the
completion of the transactions contemplated hereby, or the
observance and performance of the obligations of the Vendors and the
Covenantors herein will
(i) constitute or result in a material breach of or a material
default under, or an event which, with the giving of notice or
lapse of time or otherwise, would constitute or result in a
material breach of or material default under, or
(ii) give to any other person, after the giving of notice or
otherwise, any right of termination, cancellation or
acceleration in or with respect to
any indenture, mortgage, deed of trust, agreement, contract, lease,
franchise, certificate, consent, Permit, licence or other instrument
or commitment to which any of the Vendors or the Covenantors is a
party or is subject, or by which they are bound or from which they
derive benefit or which is required or desirable for the conduct in
the usual and ordinary course of the operation of the Business;
<PAGE>
(d) the Vendors and the Covenantors will cooperate in good faith
with the Purchasers to obtain all necessary releases, waivers,
consents and approvals, including all necessary approvals from
the lessors of each of the Leasehold Property and the Leased
Equipment and all relevant governmental authorities, as may be
required to validly and effectively transfer the Purchased Assets
to Boggs 1998 as contemplated by this Agreement and all such
releases, waivers, consents and approvals will be in a form, and
upon such terms, as may be reasonably acceptable to the
Purchasers;
(e) each of the Vendors and the Covenantors will take or cause to be
taken all proper corporate proceedings and related steps and actions
on their part (including the approval of the sale by the directors
and shareholders of the Vendors) to enable them to vest a good and
marketable title in Boggs 1998 to the Purchased Assets, free and
clear of all Encumbrances, except the Permitted Encumbrances;
(f) the Vendors and the Covenantors will use good faith efforts to make
all necessary applications for, and each of the Vendors and the
Covenantors will cooperate with the Purchasers to obtain, all
necessary approvals of the relinquishment and reissue or the
transfer to Boggs 1998 of all Permits;
(g) the Vendors will maintain in force policies of insurance heretofore
maintained;
(h) the Vendors will take reasonably good care of all the Purchased
Assets and do all reasonably necessary repairs and maintenance to
such assets as are used by the Vendors in the usual an ordinary
course of the operation of the Business, and take reasonable care to
protect and safeguard the Purchased Assets;
(i) the Vendors and the Covenators agree to indemnify and hold the
Purchasers harmless from and against any and all claims, demands,
actions, suits, proceedings, assessments, judgments, damages, costs,
losses and expenses arising from the Vendors' failure to comply with
applicable bulk sales legislation.
(j) the Vendors and the Covenantors will permit the Purchasers,
their officers, directors, agents, professional advisors, or
other authorized representatives at any time and from time to
time to inspect the Purchased Assets, the Business, the Books and
Records and to inspect, review, audit and copy any or all
information relating thereto or to any other transactions between
the parties hereto wherever and however such information may be
stored, and for these purposes will permit such persons at any
time and from time to time upon reasonable notice and during
regular business hours to enter into or upon any premises, lands
or buildings where the Purchased Assets or any such information
is or may be, or where the Business is conducted and, in the
event that use of a computer system is required to access such
information, will allow such persons the use of its computer
system for such purposes and will provide assistance in that
regard. If for any reason such information cannot be accessed
and retrieved at the Vendors' premises, the Vendors will permit
such persons to remove the medium in which such information is or
may be stored from the Vendors' premises to any other place which
has a computer system that will give such persons the opportunity
to retrieve, record and copy such information, and will permit
such persons to reproduce and retain a copy of any such
information in any format whatsoever. The Vendors will
immediately deliver to the Purchasers upon request from time to
time all computer software, tapes, disks, drums, cards, books of
account, records, ledgers, agreements, licenses, permits,
consents, correspondence, schedules, documents, statements,
lists, and other writings relating to the Purchased Assets or the
Business and such other documents and information as the
Purchasers may from time to time reasonably request, for the
purpose of inspecting, reviewing, auditing and copying the same;
<PAGE>
(k) the Vendors will not sell, consume or dispose of or transfer
possession of any of the Purchased Assets except those sold,
consumed or disposed of in the usual and ordinary course;
(l) the Vendors will conduct the Business only in the usual and
ordinary course, endeavour to preserve the organization of the
Business intact and keep available the services of the present
officers and employees (subject to voluntary resignations and
dismissals in accordance with proper business practice) and
preserve the goodwill of the suppliers and customers and others
having business relations with the Vendors relating to the
Business;
(m) the Vendors will make all necessary tax, governmental and other
filings in a timely fashion;
(n) the Vendors shall
(i) pay to all employees in the Business, as listed on Schedule
"N" hereto, all wages, salaries and bonuses and all amounts
due in lieu of holiday pay and other benefits up to and
including the Closing Date, and
(ii) use good faith best efforts to obtain, in conjunction with
the offers of employment from Boggs 1998 described in
paragraph 7.1 hereof, resignations from all of the
employees listed on Schedule "N" hereof, provided that the
resignations of those employees to whom Schedule "N" hereof
specifies that Boggs 1998 will not make offers of
employment shall not be obtained in conjunction with any
offer employment;
(n) the Vendors will use their reasonable best efforts to take all
actions and to do all things necessary in order to consummate and
make effective the transactions contemplated by this Agreement
including satisfaction of the conditions precedent set forth in
section 11.3 hereof and the covenants set forth in this section 5.1
provided that notwithstanding the foregoing, neither of the Covenantors shall
have any obligation to advance any funds to the Vendors or to guarantee any
obligations of the Vendors.
Enduring
5.2 From and after the execution of this Agreement, both before and after the
Closing Date, each of the Vendors and the Covenantors covenants and agrees with
the Purchasers that:
(a) the Vendors and the Covenantors will execute and do all such further
deeds, acts, things and assurances as may be requisite in the
reasonable opinion of the Purchasers' solicitors for more perfectly
and absolutely assigning, transferring, assuring to and vesting in
Boggs 1998 title to the Purchased Assets, free and clear of the
Encumbrances except the Permitted Encumbrances;
(b) the Vendors and the Covenantors will at the request of the
Purchasers take and cause to be taken all necessary corporate
proceedings and make all necessary filings on its part to effect
a change of its name to some name of which the name "Boggs &
Company" or any similar name does not form a part and will at the
request of the Purchasers deliver such consent as may be required
to enable Boggs 1998 to use a name of which the same name "Boggs
& Company" or any similar name forms a part;
<PAGE>
(c) the Vendors and the Covenators will continue the ongoing
environmental remediation of the property located at 3931 Glenwood
Drive, Charlotte, North Carolina as disclosed in the monitoring
report prepared by Triangle Environmental, Inc. dated November,
1998;
(d) for a period of sixty days following the Closing Date, the
Vendors shall permit Boggs 1998 to continue to occupy and use the
property located at 3931 Glenwood Drive, Charlotte, North
Carolina at the cost and expense of Boggs 1998 provided that such
costs and expenses are consistent with what is paid by the
Vendors to the Covenantors in respect of the said property prior
to the Closing Date, being the sum of $4,700 per month plus taxes
and Boggs 1998 hereby agrees to indemnify and save harmless the
Covenantors from any and all liabilities incurred by them in
their capacities as landlords of that property during the said
period and for greater certainty, Boggs 1998 will not be required
to indemnify the Covenantors for any such liabilities incurred
prior to the Closing Date. On or before the expiry of such sixty
day period, Boggs 1998 shall at its expense move the Business and
Purchased Assets to a new location of its choice; and
(e) each of the Vendors and the Covenantors, and any and all of
their agents, employees, representatives, relatives and other
persons who acted on behalf of the Vendors or the Covenantors and
were or are involved in any negotiations relating to this
Agreement, or had, have, will or may have any knowledge about any
part in such negotiations, will not, without the prior written
consent of the Purchasers, reveal or disclose any of the terms of
this Agreement, any portion of this Agreement or any of the
transactions contemplated hereby, and will keep strictly
confidential the terms of this Agreement, all information,
communications, documents and material of any kind and in any
form whatsoever, whether written, oral, technical, copied or
relating to this Agreement and any of the transactions
contemplated hereby. Notwithstanding the generality of the
foregoing, each of the Vendors and the Covenantors shall be
permitted to disclose the terms of this Agreement to any
governmental authority which lawfully requires any of the Vendors
and the Covenantors to do so, and each of the Vendors and the
Covenantors shall be permitted to disclose any information which
is within the public domain. Each of the Vendors and the
Covenantors acknowledge that breach of the covenants contained in
this paragraph will result in damage to the Purchasers, that such
damage will be difficult to determine and that the Purchasers
could not be adequately compensated for such damage by monetary
award. Accordingly, in the event of a breach of any of the
covenants contained in this paragraph, in addition to any and all
other remedies available to the Purchasers are law or in equity,
each of the Vendors and the Covenantors hereby consent to the
covenants, and each of them, contained in this paragraph being
enforced by temporary or permanent injunction, restraining order
or declaration, or all of such relief, and to such enforcement
being without the necessity of a bond. Each of the Vendors and
the Covenantors acknowledge and agree that the scope of this
paragraph is reasonable and commensurate with protection of the
legitimate interests of the Purchasers.
<PAGE>
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Representations and Warranties
6.1 The Purchasers represent and warrant to the Vendors, with the intent that
the Vendors will rely thereon in entering into this Agreement and in completing
the transactions contemplated hereby, that:
(a) Incorporation. Americlean is a corporation duly incorporated and
validly subsisting under the laws of the State of Delaware, and is
in good standing with the office of the Delaware Department of State
and Boggs 1998 is a corporation duly incorporated and validly
subsisting under the laws of the State of North Carolina, and is in
good standing with the office of the North Carolina Department of
State;
(b) Corporate Capacity. The Purchasers have the power and capacity to
own their assets and to carry on their business as presently being
carried on by them, and to enter into this Agreement and to carry
out the transactions contemplated hereby;
(c) Authorization and Enforceability. The execution and delivery of this
Agreement and the completion of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate
action on the part of the Purchasers and this Agreement constitutes
a legal, valid and binding obligation enforceable against it in
accordance with its terms;
(d) Authorized and Issued Capital. The authorized capital of
Americlean consists of 50,000,000 shares of common stock, $0.0001
par value and 5,000,000 shares of preferred stock. $0.0001 par
value, of which 1,773,629 shares of common stock (on an undiluted
basis) and no shares of preferred stock are presently issued and
outstanding and the authorized capital of Boggs 1998 consists of
100,000 shares of common stock of which 100 shares are presently
issued and outstanding;
(e) Acquisition Shares. The Acquisition Shares when delivered pursuant
to Article 2 hereof shall be validly issued and outstanding as fully
paid and non-assessable shares, subject to the provisions of this
Agreement, and the Acquisition Shares shall be transferable upon the
books of Americlean, in all cases subject to the provisions and
restrictions of all applicable securities laws;
(f) Over-the-Counter Bulletin Board Listing. The Americlean Shares
are quoted for trading on the Over-the-Counter Bulletin Board
operated by the National Association of Securities Dealers, Inc.
(the "NASD"), and Americlean is current in its filings with the
NASD;
(g) Carrying on Business. Americlean carries on business in Alberta and
British Columbia and does not carry on business in any other
jurisdiction, and neither the ownership of its assets nor the nature
of its business requires Americlean to be qualified in any other
jurisdiction;
(h) No Bankruptcy. The Purchasers are not insolvent and have not
committed an act of insolvency, nor have they made any voluntary
assignment or proposal under the applicable laws relating to
insolvency and bankruptcy and no bankruptcy petition has been filed
or presented against the Purchasers, nor any order made or
resolution passed for the winding up, dissolution, or liquidation of
the Purchasers;
<PAGE>
(i) Licenses. To the best of the knowledge, information and belief of
Americlean, Americlean holds all licenses and permits as may be
requisite for carrying on its business in the manner in which it has
heretofore been carried on, which licenses and permits have been
maintained and continue to be in good standing;
(j) Applicable Laws. Americlean has not been charged with or received
notice of breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which apply to
it, the violation of which would have a material adverse effect on
Americlean, and to the best of the knowledge, information and belief
of Americlean, Americlean is not so in breach;
(k) Charter Documents. The charter documents of the Purchasers have not
been altered since the incorporation of the Purchasers, except as
filed in the record book of the Purchasers;
(l) Books and Records. The books and records of the Purchasers fairly
and correctly set out and disclose in all material respects the
financial position of the Purchasers, and all material financial and
other transactions of Purchasers relating to its business have been
accurately recorded in such books and records; and
(m) No Violation or Breach. The performance of this Agreement will
not
(i) violate the charter documents of the Purchasers or result in
any breach of, or default under, any other agreement to which
the Purchasers are a party,
(ii) give any person any right to terminate or cancel any agreement
or any right or rights enjoyed by the Purchasers,
(iii) result in any alteration of the Purchaser's obligations under
any agreement to which the Purchasers are a party, or
(iv) violate any Court order or decree to which the Purchasers are
subject.
Non-Merger and Survival
6.2 The representations and warranties of the Purchasers contained herein will
be true at and as of the Time of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by the Vendors, the
representations and warranties of the Purchasers shall survive the Closing and
will remain in full force and effect for a period of two (2) years thereafter.
Indemnity
6.3 The Purchasers agree to jointly and severally indemnify and save harmless
the Vendors and each of them from and against any and all claims, demands,
actions, suits, proceedings, assessments, judgments, damages, costs, losses and
expenses (collectively, "Losses") resulting from any misrepresentation or breach
of warranty on the part of the Purchasers under this Agreement or from any
material misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to the Vendors by the Purchasers
hereunder, subject to the following qualifications and limitations:
<PAGE>
(a) the Vendors must give written notice of the claim to the Purchasers
setting forth the nature of the claim on or before the date which is
two (2) years from the Closing Date;
(b) a particular Vendor shall not make any claim against the Purchasers
for any indemnification pursuant to this section 6.3 unless the
liability therefore of the Purchasers to the Vendors considered
collectively exceeds $35,000 in the aggregate and the Vendors
further agree that in such event the Vendors shall together be
entitled to such indemnification only for liability in excess of
$20,000;
(c) the liability of the Purchasers to a particular Vendor for
breach of any representation or warranty hereunder is limited in
all instances to 100% of the value of the consideration received
by that particular Vendor from the Purchasers at any time for his
portion of the Vendor Shares (and for the purpose of determining
such value, each of the Americlean Shares received by that
particular Vendor shall have a deemed value equal to the Average
Trading Price at the time at which the Purchasers are notified of
the said claim notwithstanding their actual value at the time
that any such liability is determined or is payable) provided
further that the liability of a particular Purchaser for a Loss
shall not be limited, nor shall paragraph (b) of this section 6.3
apply, if such Loss arises from any bad faith and willful
omission to disclose any material information or fact concerning
a matter which is actually known to that particular Purchaser, or
a breach of any representation and warranty of that particular
Purchaser set forth in paragraph 6.1 (m) hereof.
6.4 In addition to and without limiting the extent of this Article 6, the
Purchasers agree to jointly and severally indemnify and hold the Vendors and the
Covenantors harmless from and against any and all Losses related to the breach
or default of the Vendors or the Covenantors of any contract or agreement with
The CIT Group/Credit Finance, Inc. caused by the completion of the transactions
contemplated by this Agreement by the Vendors or the Covenantors.
ARTICLE 7
COVENANTS OF THE PURCHASERS
Guarantees
7.1 The Purchasers jointly and severally covenant and agree with the Vendors and
the Covenantors that they:
(a) will cause the Covenantors and Gene Rutherford to be released from
the Guarantees listed in Schedule "P" hereto and cause the Vendors
to be released and relieved from all liabilities to The CIT
Group/Credit Finance, Inc. at or prior to Closing and will secure
the assignment to and the assumption by Boggs 1998 of the Assumed
Accounts Payable and Liabilities and the Assumed Contracts;
(b) will, from and after the Closing Date, indemnify and save the
Covenantors harmless from and against any claims, demands,
actions, damage, loss, deficiency, cost, liability and expense
which may be made or brought against the Vendors or the
Covenantors or which the Vendors or Covenantors may suffer or
incur in respect of or related to the Guarantees, the Assumed
Accounts Payable and Liabilities or the Assumed Contracts
specifically including without limitation the liability of the
Vendors to The CIT Group/Credit Finance, Inc.;
<PAGE>
(c) will, from and after the Closing Date, defend, indemnify and
hold harmless the Vendors and the Covenantors, their heirs,
personal representatives, successors and assigns, from and
against any and all claims, judgments, damages, liens,
administrative orders, consent agreements and orders,
liabilities, penalties, costs, fees and expenses (including
without limitation attorneys' and engineer's fees and expenses)
of any kind, including claims by any third party or governmental
agency, arising directly or indirectly from or in connection with
any conditions existing on the Leasehold Property which arise out
of Boggs 1998's use, storage, treatment, release, disposal of
Hazardous Materials on the Leasehold Property or into or upon any
land, body of water or the atmosphere adjacent to the Leasehold
Property or the failure by Boggs 1998 to comply with
Environmental Laws provided that such events occur after the
Closing Date and are not caused by the willful act or negligence
of the Vendors or the Covenantors and provided that such defense
and indemnification is not prohibited by public policy;
(d) will satisfy all disclosure requirements of all securities laws and
regulations applicable to the Acquisition Shares and the
transactions contemplated herein, including without limitation all
applicable SEC disclosure requirements;
(e) on and after the Time of Closing, assume and pay in the normal
course the Assumed Accounts Payable and Liabilities and indemnify
and save the Vendors and the Covenantors harmless of and from all
claims, demands, suits and actions in respect thereof;
(f) on and after the Time of Closing, assume, perform and discharge all
obligations arising under the Assumed Material Contracts;
(g) on the Closing Date Boggs 1998 shall offer employment to those
employees listed in Schedule "N" attached hereto employed on the
Closing Date in connection with the Business, save and except those
persons identified on Schedule "N" attached hereto as persons to
whom employment shall not be offered by Boggs 1998, on substantially
the terms and conditions of their employment in effect on the
Closing Date; and
(h) the Purchasers will use their reasonable best efforts to take all
action and to do all such things necessary in order to consummate
and make effective the transactions contemplated by this Agreement
on or before the Closing Date, including satisfaction of the
conditions precedent set forth in section 11.1 hereof and the
covenants set forth in this section 7.1.
Survival
7.2 The covenants set forth in this Article 7 shall survive the Closing and
continue in full force and effect for the benefit of the Vendors and the
Covenantors for the respective periods stipulated therein.
<PAGE>
ARTICLE 8
LINE OF CREDIT
The Vendors and the Covenantors shall cooperate in good faith with the
Purchasers to cause the Vendors to maintain until the Time of Closing its
present operating line of credit of up to $3,000,000 with The CIT Group/Credit
Finance, Inc. The Vendors and the Covenantors represent to the Purchasers that
such line of credit is in the aforesaid amount, that it is secured by the
accounts receivable and other assets of the Vendors, and any draws on the line
of credit are subject to the terms and conditions of said loan contained in
Schedule "D" attached hereto.
ARTICLE 9
EMPLOYMENT AGREEMENTS AND OPTION AGREEMENTS
At the Time of Closing, Boggs 1998 shall enter into the Employment
Agreements with each of the Covenantors pursuant to which each of them will
provide services to Boggs 1998 and Americlean shall enter into the Option
Agreements with each of the Covenantors. The Employment Agreements and Option
Agreements shall be substantially in the form of Schedule "Q" hereto.
ARTICLE 10
LEASE ADJUSTMENT AGREEMENT
At the Time of Closing, Boggs 1998 shall enter into the Lease Adjustment
Agreement with the Vendors pursuant to which Boggs 1998 will agree to compensate
the Covenantors for certain losses which they may suffer arising from the lease
of the property located at 3931 Glenwood Drive, Charlotte, North Carolina. The
Lease Adjustment Agreement shall be substantially in the form of Schedule "S""
hereto.
ARTICLE 11
CONDITIONS PRECEDENT
Conditions Precedent in favour of the Purchasers
11.1 The Purchaser's obligation to carry out the transactions contemplated
hereby is subject to the fulfillment of each of the following conditions
precedent on or before the Time of Closing:
(a) all documents or copies of documents required to be executed and
delivered to the Purchasers hereunder will have been so executed and
delivered;
(b) all of the terms, covenants and conditions of this Agreement to be
complied with or performed in all material respects by the Vendors
and the Covenantors at or prior to the Closing will have been
complied with or performed and the representation and warranties of
the Vendors and the Covenantors shall be true in all material
respects at the Time of Closing;
(c) title to the Purchased Assets will be free and clear of all
mortgages, liens, charges, pledges, security interests,
Encumbrances or other claims whatsoever, except for the Permitted
Encumbrances, provided however that this paragraph 11.1(c) shall
not constitute a condition precedent to the Purchasers'
obligations if title to the Purchased Assets is not free and
clear due to any security interest in favour of The CIT
Group/Credit Finance, Inc.;
<PAGE>
(d) subject to Article 12 hereof and except as disclosed to the
Purchasers in writing prior to the date hereof, there will not have
occurred since the date of this Agreement
(i) any material adverse change in the financial position or
condition of the Vendors, their liabilities or the
Purchased Assets or any damage, loss or other change in
circumstances materially and adversely affecting the
Vendors, the Business or the Purchased Assets or the
Vendors' right to carry on the Business, other than changes
in the ordinary course of business and trends identified to
the Purchasers prior to the date hereof, none of which has
been materially adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to the Vendors' or
the Business (whether or not covered by insurance) materially
and adversely affecting the Vendors, the Business or the
Purchased Assets;
(e) the transactions contemplated hereby shall have been approved by all
other regulatory authorities having jurisdiction over the subject
matter hereof, if any; and
(f) on or before the Closing Date:
(i) no governmental authority shall have enacted any statue,
regulation or bylaws or announced any policy that will
materially and adversely affect the Business, any of the
Purchased Assets or the right of the Purchasers to the full
enjoyment of the Purchased Assets, and
(ii) no injunction or restraining order of a court of
administrative tribunal or competent jurisdiction shall be in
effect which prohibits the transactions contemplated hereunder
and no action or proceeding shall have been instituted and
remain pending before any such court or administrative
tribunal to restrain or prohibit the transactions contemplated
hereby.
Waiver by Americlean
11.2 The conditions precedent set out in section 11.1 hereof are inserted for
the exclusive benefit of the Purchasers and any such condition may be waived in
whole or in part by the Purchasers at or prior to the Closing by delivering to
the Vendors a written waiver to that effect signed by the Purchasers. In the
event that the conditions precedent set out in section 11.1 hereof are not
satisfied on or before the Time of Closing the Purchasers shall be released from
all obligations under this Agreement.
Conditions Precedent in Favour of Vendors
11.3 Subject to section 11.5 hereof, the obligation of the Vendors to carry out
the transactions contemplated hereby is subject to the fulfillment of each of
the following conditions precedent on or before the Time of Closing:
(a) all documents or copies of documents required to be executed and
delivered to the Vendors hereunder will have been so executed and
delivered;
(b) all of the terms, covenants and conditions of this Agreement to be
complied with or performed in all material respects by the
Purchasers at or prior to the Closing will have been complied with
or performed and the representation and warranties of the Purchasers
shall be true in all material respects at the Time of Closing;
<PAGE>
(c) Americlean will have delivered the Hold-back Shares and the
Hold-back Amount to the Escrow Agent and the Acquisition Shares will
be registered on the books of Americlean in the name of the Vendors
at the Time of Closing and the remaining Purchase Price will be
delivered directly to the Vendors;
(d) title to the Acquisition Shares will be free and clear of all
mortgages, liens, charges, pledges, security interests, encumbrances
or other claims whatsoever, save and except as provided for in this
Agreement;
(e) the Covenantors and Gene Rutherford shall have been fully and
completely released from their obligations under the Guarantees and
the Vendors shall have been fully and completely released from their
obligations with respect to or related to the Assumed Accounts
Payable and Liabilities and indebtedness to The CIT Group/Credit
Finance, Inc.; and
(f) the transaction contemplated herein shall not cause a default or
breach of any contract that either Vendor is a party to unless Boggs
1998 agrees to unconditionally indemnify and hold each Vendor
harmless from any and all liability related thereto.
Waiver by Vendors
11.4 Subject to section 11.5 hereof, the conditions precedent set out in section
11.3 hereof are inserted for the exclusive benefit of the Vendors and any such
condition may be waived in whole or in part by the Vendors at or prior to the
Closing by delivering to the Purchasers a written waiver to that effect signed
by the Vendors. In the event that the conditions precedent set out in section
11.3 hereof are not satisfied on or before the Time of Closing the Vendors shall
be released from all obligations under this Agreement.
No Waiver of Paragraph 11.3(e)
11.5 The Vendors agree that the condition precedent contained in section 11.3(e)
hereof which provides that the Covenantors and Gene Rutherford shall have been
fully and completely released from their obligations under the Guarantees prior
to the completion of the transactions contemplated hereby will not be waived by
the Vendors until such time as The CIT Group/Credit Finance, Inc. has agreed in
writing to release the Vendors from their obligations to The CIT Group/Credit
Finance, Inc. and to release the Covenantors from their obligations under the
Guarantees and a copy of such agreement is delivered to Americlean.
Nature of Conditions Precedent
11.6 The conditions precedent set forth in this Article 11 are conditions of
completion of the transactions contemplated by this Agreement and are not
conditions precedent to the existence of a binding agreement. Each party
acknowledges receipt of the sum of $1.00 and other good and valuable
consideration as separate and distinct consideration for agreeing to the
conditions of precedent in favour of the other party or parties set forth in
this Article 11.
Termination
11.7 Notwithstanding any provision herein to the contrary, save and except for
sections 11.8 and 11.9 hereof, if Closing does not occur on or before March 3,
1999, this Agreement will be at an end and will have no further force or effect,
unless otherwise agreed upon by the parties in writing.
<PAGE>
Confidentiality
11.8 The parties hereto agree that the existence and terms of this Agreement are
confidential and that if this Agreement is terminated pursuant to section 11.7
hereof, the parties agree to return to one another any and all financial,
technical and business documents delivered to the other party or parties in
connection with the negotiation and execution of this Agreement and shall keep
the terms of this Agreement and all information and documents received from the
Vendors and the contents thereof confidential and not utilize nor reveal or
release same, provided, however, that Americlean will be required to issue one
or more news release respecting the proposed transactions contemplated hereby.
Transaction Costs
11.9 At the Time of Closing the Vendors and the Covenantors shall provide to the
Purchasers a statement of all accounting, legal and other costs incurred by the
Vendors prior to the Time of Closing directly related to completing the
transactions contemplated herein and excluding costs which would otherwise be
incurred by the Vendors in the ordinary course (the "Transaction Costs"). The
Vendors agree that the Transaction Costs, to the extent that they were not paid
by the Vendors prior to the Time of Closing from the Advance, shall be deducted
from Closing Price and, if necessary, the Hold-back Amount.
ARTICLE 12
RISK
If any material loss or damage to the Purchased Assets occurs prior to
Closing and such loss or damage, in the Purchasers' reasonable opinion, cannot
be substantially repaired or replaced within sixty (60) days, the Purchasers
shall, within seven (7) days following any such loss or damage, by notice in
writing to the Vendors, at their option, either:
(a) terminate this Agreement, in which case no party will be under any
further obligation to any other party; or
(b) elect to complete the purchase of the Purchased Assets and the
other transactions contemplated hereby, in which case the
proceeds and the rights to receive the proceeds of all insurance
covering such loss or damage will, as a condition precedent to
the Purchasers' obligations to carry out the transactions
contemplated hereby, be vested in the Purchasers or otherwise
adequately secured to the satisfaction of the Purchasers on or
before the Closing Date.
ARTICLE 13
CLOSING
Closing
13.1 The purchase and sale of the Purchased Assets, the assumption of the
Assumed Accounts Payable and Liabilities and the other transactions contemplated
by this Agreement will be closed at the Place of Closing and Time of Closing in
accordance with the closing procedure set out in this Article 13.
Documents to be Delivered by Vendors and the Covenantors
13.2 On or before the Closing, the Vendors and the Covenantors will deliver or
cause to be delivered to the Purchasers:
<PAGE>
(a) certificates of status in respect of the Vendors and a certificate
of incumbency in respect of the authorized signatories of the
Vendors;
(b) a statutory declaration of the Presidents of the Vendors and the
Covenantors dated the Closing Date to the effect that the
representations and warranties of the Vendors contained in this
Agreement are true and correct and that the covenants and agreements
of the Vendors and the Covenantors to be performed on or before the
Closing Date pursuant to the terms of this Agreement have been duly
performed;
(c) all deeds of conveyance, bills of sale, transfer and assignments,
duly executed in form and content satisfactory to the Purchasers'
solicitors, appropriate to effectively vest good and marketable
title to the Purchased Assets in Boggs 1998 to the extent
contemplated by this Agreement, and immediately registrable in all
places where registration of such instruments is necessary or
desirable;
(d) all consents or approvals required by this Agreement to be obtained
by the Vendors;
(e) possession of the Purchased Assets;
(f) a statement of the Assumed Accounts Payable and Liabilities signed
by the Vendors;
(g) available evidence of the transfer to Boggs 1998 or acquisition by
Boggs 1998 of all Permits;
(h) duly executed releases of, or evidence to the reasonable
satisfaction of the Purchasers as to the discharge of any and all
Indebtedness which Boggs 1998 has not agreed to assume and which may
be enforceable against any of the Purchased Assets being purchased
hereunder;
(i) certified copies of such resolutions of the shareholders and
directors of the Vendors as are required to be passed to authorize
the execution, delivery and implementation of this Agreement;
(j) an acknowledgement from each of the Vendors of the satisfaction of
the conditions precedent set forth in section 11.3 hereof;
(k) the Employment Agreements, duly executed by the Covenantors;
(l) the Option Agreements, duly executed by each of the Vendors;
(m) the Escrow Agreement, duly executed by each of the Vendors;
(n) the Lease Adjustment Agreement, duly executed by each of the
Vendors;
(o) the favourable legal opinion of the Vendors' solicitors, in form
reasonably satisfactory to the Purchaser's solicitors stating
that the Vendors have the corporate authority to own the
Purchased Assets, conduct the Business, execute and deliver this
Agreement and undertake and complete the transactions
contemplated hereby, that all necessary steps and corporate
proceedings have been taken by the Vendors and the Covenantors to
permit the sale of the Purchased Assets under this Agreement and
that this Agreement and all other agreements and instruments
required hereunder have been duly and validly authorized,
executed and delivered by each of the Vendors and Covenantors and
are legal, valid and binding obligations of each of the Vendors
and the Covenantors in accordance with its terms, except as may
be limited by laws of general application affecting the rights of
creditors generally; and
<PAGE>
(p) such other documents as the Purchasers may reasonably require to
give effect to the terms and intention of this Agreement.
Documents to be Delivered by the Purchasers
13.3 On or before the Closing, the Purchasers shall deliver or cause to be
delivered to the Vendors, the Covenantors or the Escrow Agent, as applicable:
(a) certificates of status in respect of the Purchasers and a
certificate of incumbency in respect of the authorized signatories
of the Purchasers;
(b) a certified cheque, bank draft or solicitor's trust cheque made
payable to the Escrow Agent in the amount of the Closing Price;
(c) a certified cheque, bank draft or solicitor's trust cheque made
payable to the Escrow Agent in the amount of the Hold-back Amount;
(d) share certificates duly registered in the names of the Vendors and
representing the Acquisition Shares;
(e) certified copies of such resolutions of the directors of the
Purchasers as are required to be passed to authorize the execution,
delivery and implementation of this Agreement;
(f) a duly executed covenant of the Purchasers in favour of the Vendors
and the Covenantors agreeing to assume and pay or perform and
indemnify the Vendors and the Covenantors against the Assumed
Accounts Payable and Liabilities, obligations under the Assumed
Material Contracts, and other obligations agreed to be assumed
hereunder by the Purchasers in the manner and to the extent herein
provided;
(g) a statutory declaration of the Presidents of the Purchasers dated
the Closing Date to the effect that the representations and
warranties of the Purchasers contained in this Agreement are true
and correct and that the covenants and agreements of the Purchasers
to be performed on or before the Closing Date pursuant to the terms
of this Agreement have been duly performed;
(h) releases from all Guarantees and indebtedness as required by Article
7 hereof;
(i) the Escrow Agreement, duly executed by the Purchasers;
(j) the Employment Agreements, duly executed by Boggs 1998;
(k) the Option Agreements, duly executed by Americlean;
(l) the Lease Adjustment Agreement, duly executed by Boggs 1998;
<PAGE>
(m) an acknowledgement from the Purchasers of the satisfaction of the
conditions precedent set forth in section 13.1 hereof;
(n) a favourable legal opinion of the Purchasers' solicitors, in
form reasonably satisfactory to the Vendors' solicitors stating
that the Purchasers have the capacity to execute and deliver this
Agreement and complete the transactions contemplated hereby, that
all necessary steps and corporate proceedings have been taken to
permit the purchase of the Purchased Assets by Boggs 1998 under
this Agreement and that this Agreement and all other agreements
required hereunder have been duly and validly authorized,
executed and delivered by the Purchasers and are legal, valid and
binding obligations of the Purchasers in accordance with its
terms, except as may be limited by laws of general application
affecting the rights of creditors generally; and
(o) such other documents as the Vendors and the Covenantors may
reasonably require to give effect to the terms and intention of this
Agreement.
Third Party Consents
13.4 The Purchasers and the Vendors will use commercially reasonable efforts
mutually to secure prior to the Closing Date all reasonable consents or
approvals required to be obtained by the Vendors and the Covenantors for the
purposes of validly transferring the Purchased Assets to Boggs 1998 and
preserving and maintaining the interests of the Vendors under any and all
contracts and in relation to the Purchased Assets until the Time of Closing,
specifically including without further limitation all consents and approvals of
The CIT Group/Credit Finance, Inc. The obligations of the Vendors and the
Covenantors hereunder are separately conditioned upon such consents and
approvals.
ARTICLE 14
CONVEYANCE
Conveyance of Purchased Assets
14.1 On completion of the Closing, this Agreement shall, without further act or
formality, operate as a transfer to Boggs 1998 of all Purchased Assets to be
sold and purchased hereunder as the same shall be at the close of business on
the Closing Date. The Vendors shall nevertheless, at the Closing and from time
to time after the Closing, execute and deliver to Boggs 1998 all such
conveyances, transfers, assignments and other instruments in writing and further
assurances as the Purchasers or the Purchasers' solicitors shall reasonably
require from the Vendors, and the Purchasers shall execute and deliver to the
Vendors all such agreements of assumptions and other instruments in writing and
further assurances as the Vendors or the Vendors' solicitors shall reasonably
require in order to give effect to the provisions of this Agreement.
Trust Regarding Purchased Assets Not Conveyed
14.2 Should any of the Purchased Assets intended to be transferred hereunder not
be transferred to Boggs 1998 at the completion of the Closing on the Closing
Date, the Vendors shall hold as bare trustee in trust for, and at the sole cost
of Boggs 1998, all such Purchased Assets from the commencement of business on
the Closing Date until such Purchased Assets are effectively transferred.
<PAGE>
ARTICLE 15
GENERAL PROVISIONS
Arbitration
15.1 The parties hereto shall attempt to resolve any dispute, controversy,
difference or claim arising out of or relating to this Agreement by negotiation
in good faith. If such good faith negotiation fails to resolve such dispute,
controversy, difference or claim within fifteen (15) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration in the City of Charlotte, North Carolina.
The arbitration panel shall consist of a single arbitrator selected by the joint
agreement of the parties to the dispute; provided that if the parties cannot
agree upon the identity of a single arbitrator within fifteen (15) days, then
the arbitration panel shall consist of three (3) arbitrators, one (1) of whom
shall be appointed by each party within ten (10) days and the third duly
appointed by mutual agreement of the two (2) arbitrators so appointed by the
parties; provided further that if the two arbitrators cannot select the third
arbitrator within ten (10) days after their appointment, the selection of the
third arbitrator shall be made in accordance with the general rules of
arbitration in relation to arbitrations in the State of North Carolina (the
"Rules"). If no such arbitrator is appointed within ten (10) days of such
request, either party may apply to a Court having jurisdiction to make such
appointment. Once the arbitration panel has been selected, the arbitration of
the dispute shall be conducted in English in accordance with the Rules in the
City of Charlotte, North Carolina, unless otherwise provided or limited by the
Rules. The arbitrator(s) shall give each of the parties a fair opportunity to
prepare, including pre-arbitration hearing discoveries, and present its position
with respect to the dispute, and each party shall be entitled to call witnesses
to testify, examine and cross-examine witnesses that the other party calls to
testify, introduce documents and other materials and submit written statements
of position and arguments. The arbitration panel shall make a final
determination, to be provided in writing to each party, that resolves the
dispute and includes an allocation of the aggregate fees, costs and expenses of
the arbitration between the parties to the dispute, such allocation to be made
in the sole discretion of the arbitration panel after giving due consideration
to the relative merits of the parties' positions in the dispute. All results of
the arbitration proceedings shall be final, conclusive and binding on all
parties to this Agreement, and shall not be subject to judicial review. Judgment
upon the award rendered by the arbitrator may be entered in State of North
Carolina or any other Court having competent jurisdiction. For the purposes of
this section 15.1, the Vendors and the Covenantors shall collectively be deemed
to be one party, and their selection of an arbitrator or concurrence therein
shall be made by notice in writing duly executed by a simple majority of the
Vendors and the Covenantors.
Notice
15.2 Any notice required or permitted to be given by any party will be deemed to
be given when in writing and delivered to the address for notice of the intended
recipient by personal delivery, prepaid single certified or registered mail, or
telecopier. Any notice delivered by mail shall be deemed to have been received
on the fourth business day after and excluding the date of mailing, except in
the event of a disruption in regular postal service in which event such notice
shall be deemed to be delivered on the actual date of receipt. Any notice
delivered personally or by telecopier shall be deemed to have been received on
the actual date of delivery.
<PAGE>
Addresses for Service
15.3 The address for service of notice of each of the parties hereto is as
follows:
(a) the Covenantors:
Jay C. Shinn
7404 Red Oak Lane
Charlotte, North Carolina
USA 28226
Telecopier: (704) 392-9281
James Hynoski
9600 Logan Court
Charlotte, North Carolina
USA 28210
Telecopier: (704) 392-9281
(b) the Purchasers:
1910, 1177 West Hastings Street
Vancouver, British Columbia
V6E 2K3
Telecopier: (604) 682-0019
(c) the Vendors:
3931 Glenwood Drive
Charlotte, North Carolina
USA 28208
Telecopier: (704) 392-9281
Change of Address
15.4 Any party may, by notice to the other parties change its address for notice
to some other address in North America and will so change its address for notice
whenever the existing address or notice ceases to be adequate for delivery by
hand. A post office box may not be used as an address for service.
Further Assurances
15.5 Each of the parties will execute and deliver such further and other
documents and do and perform such further and other acts as any other party may
reasonably require to carry out and give effect to the terms and intention of
this Agreement.
Time of the Essence
15.6 Time is expressly declared to be the essence of this Agreement.
<PAGE>
Entire Agreement
15.7 The provisions contained herein constitute the entire agreement among the
Vendors, the Covenantors and the Purchasers respecting the subject matter hereof
and supersede all previous communications, representations and agreements,
whether verbal or written, among the Vendors, Covenantors and the Purchasers
with respect to the subject matter hereof.
Inurement
15.8 This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
Assignment
15.9 This Agreement is not assignable without the prior written consent of the
parties hereto, which consent shall not be unreasonably withheld.
Counterparts
15.10 This Agreement may be executed in counterparts, each of which when
executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Agreement. Delivery of
executed copies of this Agreement by telecopier will constitute proper delivery,
provided that originally executed counterparts are delivered to the parties
within a reasonable time thereafter.
Applicable Law
15.11 This Agreement is subject to the laws of the State of North Carolina and
the laws of the United States of America applicable therein. Subject to section
15.1 hereof, any disputes arising out of, in connection with, or with respect to
this Agreement, the subject matter hereof, the performance or non-performance of
any obligation hereunder, or any of the transactions contemplated hereby shall
be adjudicated in a Court of competent civil jurisdiction sitting in the City of
Charlotte, North Carolina and nowhere else.
Bulk Sales Legislation
The parties agree to waive the requirements, if any, of all applicable bulk
sales laws.
IN WITNESS WHEREOF the parties have executed this Agreement effective as of the
day and year first above written.
AMERICLEAN, INC.
By: ___________________________
Witness Authorized Signatory
Name ____________________________
Name
Address ____________________________
Title
BOGGS & COMPANY (1998), INC.
By: ___________________________
Witness Authorized Signatory
Name ____________________________
Name
Address ____________________________
Title
<PAGE>
BOGGS & COMPANY, INC.
By: ___________________________
Witness Authorized Signatory
Name ____________________________
Name
Address ____________________________
Title
JKG GROUP, INC.
By: ___________________________
Witness Authorized Signatory
Name ____________________________
Name
Address ____________________________
Title
___________________________________
Witness JAY C. SHINN
Name
Address
___________________________________
Witness JIM HYNOSKI
Name
Address
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of Americlean, Inc., whereby
certain Selling Shareholders propose to sell up to 1,200,000 shares of the
Company's Common Stock. Reference is also made to Exhibit 5 included in the
Registration Statement relating to the validity of the Securities proposed to be
sold.
We hereby consent to the use of our opinion concerning the validity of the
securities proposed to be issued and sold.
Very truly yours,
HART & TRINEN, LLP
William T. Hart
Denver, Colorado
May 14, 1999
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 31, 1998 [except for note 11[b] which is as of
September 26, 1998], with respect to the consolidated financial statements of
Americlean, Inc. for the year ended March 31, 1998 in the Registration Statement
(Form SB-2) and related Prospectus of Americlean, Inc. for the registration of
1,200,000 common shares.
/s/ Ernst & Young LLP
- ---------------------
Vancouver, Canada
May 13, 1999
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated December 16, 1998
relating to the combined financial statements of Boggs & Company, Inc. and
JKG Group, Inc. appearing in such Prospectus. Our report contains an
explanatory paragraph regarding uncertainties as to the outcome of certain
going concern issues.
We also consent to the references to us under the headings "Experts" in
such Prospectus.
/s/ Bullard & Blanchard, PLLC
- --------------------------------
Charlotte, North Carolina
May 14, 1999
