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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under
Section 12(b) or (g) of
the Securities Exchange Act of 1934
Seychelle Environmental Technologies, Inc.
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(Exact Name of Small Business Issuer as specified in its charter)
Nevada 33-0836954
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(State or other jurisdiction (IRS Employer File Number)
of incorporation)
32921 Calle Perfecto
San Juan Capistrano, California 92675
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(Address of principal executive offices) (zip code)
Securities to be Registered Pursuant to Section 12(b) of the Act:
None
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $0.001 per share par value
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References in this document to "us," "we," or "the Company" refer to Seychelle
Environmental Technologies, Inc., its predecessor and its subsidiary.
ITEM 1. DESCRIPTION OF BUSINESS.
(A) General Development of Business
We are a Nevada corporation. Our principal business address is 32921
Calle Perfecto, San Juan Capistrano, California 92675. Our telephone number at
this address is 949-234-1999.
We were incorporated under the laws of the State of Nevada on January
23, 1998 as a change of domicile to Royal Net, Inc., a Utah corporation that was
originally incorporated on January 24, 1986. Royal Net, Inc. changed its state
of domicile to Nevada and its name to Seychelle Environmental Technologies, Inc.
effective in January 1998.
On January 30, 1998, we entered into an Exchange Agreement with
Seychelle Water Technologies, Inc., a Nevada corporation ("SWT"), whereby we
exchanged our issued and outstanding capital shares with the shareholders of SWT
on a one share for one share basis. We became the parent company and SWT became
a wholly owned subsidiary. SWT had been formed in 1997 to market water
filtration systems.
On January 31, 1998, we entered into a Purchase Agreement to acquire
all of the assets of Aqua Vision International, a California sole
proprietorship. This Purchase Agreement was amended on February 26, 1999 to
provide for the issuance of 8,000 shares of Series "AAA" 12% Cumulative
Convertible Preferred Shares in lieu of all consideration which had remained
unpaid under the original Purchase Agreement. Aqua Vision International had been
in operation since 1996 to develop, manufacture, and market its own proprietary
water filtration systems.
Organization
Our Company is presently comprised of one corporation with one
subsidiary, Seychelle Water Technologies, Inc., a Nevada corporation.
(B) Operations
General
We propose to implement a business plan to manufacture and market a
range of water filtration products. We are dedicated to improving the quality of
life by providing highly effective, economical, convenient, durable, reliable
filtration systems for assured quality drinking water. We design, manufacture
and supply water filtration systems to the general public. These systems will
range from portable water bottles that can be filled from nearly any available
source, to units which provide entire water facilities at the point of entry for
those facilities. We also have the capability of tailoring systems to meet the
needs of areas where specific water problems or severe water contamination
exist, on a local or worldwide basis.
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RISK FACTORS
THE OWNERSHIP AND INVESTMENT IN OUR SECURITIES INVOLVES SUBSTANTIAL
RISKS, SOME OF WHICH ARE SUMMARIZED BELOW. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS AMONG OTHERS, RELATING TO OUR COMPANY.
NEWLY-FORMED COMPANY Our Company was formed on January 23, 1998 and
acquired the operations of a company which had only been in existence since
1995. Since beginning operations, we have operated at a loss, although we were
profitable for the first nine months of the current fiscal year. Nevertheless,
we have not engaged in any substantial business activity over a sustained period
of time, and thus cannot be said to have a successful operating history. We
expect to incur some losses in the near future. Further, we are likely to
experience under-capitalization shortages, setbacks and other risks common to
emerging businesses. There can be no assurance that we will operate profitably
in the future or sustain our profitability.
NEED FOR ADDITIONAL FINANCING For the foreseeable future, we expect to
rely principally upon our ability to operate on a profitable basis, the success
of which cannot be guaranteed. From time to time, we may have to obtain
additional financing in order to conduct our business in a manner consistent
with our proposed operations. There can be no guaranty that additional funds
will be available when, and if, needed. If we are unable to obtain such
financing, or if the terms thereof are too costly, we may be forced to curtail
proposed expansion of operations until such time as alternative financing may be
arranged, which could have a materially adverse impact on our operations and our
shareholders' investment. At the present time, we have no definitive plans for
additional financing.
POTENTIAL OPERATIONAL PROBLEMS The results of our operations will
depend, among other things, upon our ability to develop and to market our water
filtration products. Further, it is possible that our proposed operations will
not generate income sufficient to meet operating expenses or will generate
income and capital appreciation, if any, at rates lower than those anticipated
or necessary to sustain ourselves. Our operations may be affected by many
factors, some of which are beyond our control. Any of these problems, or a
combination thereof, could have a materially adverse effect on our viability as
an entity.
START-UP COMPANY-INHERENTLY RISKY-COMPETITION Because we are a start-up
company with limited history, our operations will be extremely competitive and
subject to numerous risks. The water filtration business is highly competitive
with many companies having access to the same market. Substantially all of them
have greater financial resources and longer operating histories than us and can
be expected to compete within the business in which we engage and intend to
engage. Although we expect ultimately to be competitive in the markets in which
we compete and intend to compete, there can be no assurance that we will have
the necessary resources to be competitive. There are other risks which are
common to start-up companies. Many of these risks cannot be foreseen at this
time. Therefore, investors should consider an investment in us to be an
extremely risky venture.
DEPENDENCE UPON TECHNOLOGY We are operating in a business which
requires extensive and continuing research efforts. There can be no assurance
that new products will not render our products obsolete at some time in the
future. In addition, there can be no guarantee that we will be able to protect
our
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technology from being copied or infringed upon. Therefore, there are no
assurances that we will be able to obtain and to maintain a profitable position
in the marketplace.
SUCCESS DEPENDENT UPON MANAGEMENT Our success is dependent upon the
decision making of our directors and executive officers. These individuals
intend to commit as much time as necessary to our business. The loss of any or
all of these individuals could have a materially adverse impact on our
operations. We have no employment agreement with any individuals and have not
obtained key man life insurance on the lives of any of these individuals.
GENERAL BUSINESS PLAN
To understand the full extent of our water filtration technology, it is
first necessary to look at the hundreds of pollutants found in drinking water.
These can be grouped into the following zones of contamination:
Aesthetics: unpleasant taste, odor, clarity, chlorine,
sand and sediment.
Biologics: harmful microscopic pathogens such as,
Cryptosporidium, Giardia and other
waterborne cysts and spores.
Chemicals: toxic chemicals, detergents, pesticides and
other harmful industrial and agricultural
wastes.
Radiological: Radon 222
Dissolved solids: heavy metals such as aluminum,
asbestos, copper, lead, mercury and others.
The elements listed are only a sampling of the contaminants red-flagged
by the Environmental Protection Agency (EPA) as contaminants which may be
hazardous to your health. The EPA has established Maximum Contamination Levels
(MCL) as guidelines to public water supply companies.
Our patented products reduce up to 99.8% (and in some cases more) of
the key contaminants listed by the EPA. We combine absolute micron physical
filtration, adsorption, and reduction using sorbent medias and other materials.
All products are engineered by first researching the many contaminants listed by
the EPA in its National Drinking Water Standards and the contaminants' direct
effect upon health from ingestion. All possible areas of harmful contaminants
are considered in the design effort in order to reach maximum reduction
percentages of these pollutants. Health claims are represented by the reduction
in volume percentages as determined by various independent labs.
We develop and manufacture products in the area of water filtration -
Point of Use, Portable Water Filtration Systems and (currently under
development) Point of Entry units.
Our Point of Use (POU) filtration system is installed at a single tap
or hook-up where the water actually comes out. Americans are now spending
hundreds of millions of dollars per year for home drinking water units and their
replacement cartridges. Our POU products include our SE-1 Counter Top system.
This system uses the patented Quick Disconnect adapter. The one-micron filter
provides contaminant reduction for over 2,500 gallons per replaceable cartridge
filter.
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Our Shower Massage and Hand Held Shower Filter Units effectively reduce
the harmful contaminants that can be ingested, inhaled and absorbed through the
skin cells while showering. Our system filters over 15,000 gallons, or for up to
six months, per replaceable, reversible cartridge.
Our Coffee Maker Filtration System was designed to pre-treat product
water to eliminate scaling and remove unpleasant taste, odor and harmful
contaminants from coffee maker systems. The filter extends the life of the home,
office or industrial coffee machine as much as ten times.
Our Portable Water Filtration Units are filtration systems built to go
anywhere for use at any time. They are designed to be a practical, effective,
and superior substitute for bottled water and to provide additional protection
against waterborne contaminants while traveling, especially in foreign lands,
where the EPA regulations may not exist. Our patented Ionic-Adsorption
Micro-Filtration system is in every portable unit, including the following:
Gravity Feed Water Filtration System- portable unit that houses a
three-multi phase filtering system, including one phase with
anti-microbial properties, for enhanced filtration effectiveness. This
system produces a half-gallon of filtered water in less than ten
minutes. This system is portable and easily stored when not in use.
Bottom's UP(TM)- patented design, available in 18oz., 24oz. (this
is the "Designer Bottom's UP(TM)), and 30oz. portable water filtration
bottles, all of which fill from the bottom.
Baby UP(TM)- 18oz. portable water filtration bottle that attaches
to any standard baby bottle. It is filled from the bottom.
Canteen - 30oz. portable water filtration bottle. It fills from
the top and is carried on a belt or by sling.
Pres 2 Pure(TM)- 24oz. portable water filtration bottle. The
device fills from the top and has an easy grip design that also fits
into bike holders or a car caddy.
Tap 2 Pure(TM)- Portable universal rubber adapter with a filter
attached, which fits nearly every faucet, both in the United States and
internationally.
Pump n Pure(TM)- small. For use in pumping water from any source
while engaging in outdoor activities or in emergencies. This device
comes with a carrying case.
Pump n Pure(TM)- large. To be used with 5-gallon bottles when
large quantities of water are needed in remote areas or during
emergencies.
Products in Development
Our Point of Entry (POE) filtration system is designed to be installed
at a single point where water enters the entire home, office building, school,
hotel, hospital, or apartment complex. We believe that this
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market is expanding rapidly. Our POE units are three-phase filtering systems
which combine various filtering concepts.
Our Under the Counter Unit is a system designed to be installed below
the counter, delivering filtered water through a sink dispenser. This unit
contains a one micron filter to provide contaminant reduction for over 2,500
gallons per replaceable cartridge filter and is designed to be convenient,
automatic, out of sight, permanently installed and to filter water for an ice
maker as well.
Our Hydration System is a portable backpack that provides filtered
water on demand. The system features a flexible, ergonomic blow-molded
reservoir, an air pressurized delivery system, an insulated cover, a survival
kit and includes additional anti-microbial properties in the patented filtration
system.
Our goal is to capture a significant market share of the water
filtration market using these and other products which we plan to develop. We
plan to market our current products and to develop additional products in the
water filtration area.
(C) Markets
At the present time, we have begun our marketing efforts and have
developed relationships with various organizations in private labeling,
multi-level marketing, our own labeled products, and international licensing.
Our marketing plan is focused primarily on developing public awareness
and acceptance of our products through sales to independent sales
representatives, who sell to retailers and direct selling programs. Our targeted
markets can be grouped into the following five categories:
The health-conscious - Those who are very aware of what they ingest and
insist on high quality drinking water to help ensure their physical and mental
well-being. They also demand that their water taste good and be odor and
contaminant free. They personally filter their own water.
The traveler - Those concerned with the quality of foreign water
supplies encountered while traveling. The phrase "Don't drink the water," if not
heeded, could destroy a business trip or vacation with family or friends.
Filtration of foreign waters equals protection from foreign contaminants.
The bottled water buyer - The substantial segment of the nation'
population currently expending substantial amounts to purchase bottled water.
The bottled water industry is over $8 billion strong, worldwide. The uninformed
public is paying as much as $8.00 per gallon for water which is often from a
questionable source and of unknown quality. As much as 70% of the water consumed
by the average person is consumed away from home. As a result, we plan to be a
direct competitor to the bottled water industry.
The emergency prepared - Those individuals wishing to ensure a safe
alternative source for drinking water in the event of an emergency. When your
survival depends upon securing reliable drinking water, you must be able to turn
to any available source, such as a swimming pool, flood waters, or a toilet
tank, and must be able to filter it to a level safe for ingestion. In light of
the numerous recent natural disasters
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throughout the world, the necessity for a way to be assured safe drinking water
is foremost in the minds of many people all over the world.
The exercise and sports enthusiast - Those individuals seeking a safe
and convenient source of drinking water while either exercising indoors or
hiking, biking, swimming, camping, fishing or mountain climbing in remote areas.
When exercising, it is important to replenish the water lost through exertion
with water free of contaminants. Even the most pristine appearing stream can be
polluted. "Everyone is downstream from someone" says it all.
(D) Raw Materials
The use of proprietary materials in the manufacturing of our line of
products is a major factor. We project production volumes to coordinate with raw
materials. However, at the present time, there is adequate availability of raw
materials for all of our products. We do not expect this situation to change in
the near future.
(E) Customers and Competition
There are a number of established companies in the water filtration
business, with no one company dominating this business. Many of those companies
are larger and better capitalized than us and/or have greater personnel
resources and technical reserves. In view of our extremely limited financial
resources and limited management availability, we will continue to be at a
significant competitive disadvantage compared to many, if not most, of our
competitors. There is no guarantee that we can continue to be profitable.
(F) Backlog
As of November 30, 1999 we had no current backlog.
(G) Employees
As of November 30, 1999 we had thirteen employees, seven corporate and
administrative employees and six operations and warehouse employees, who worked
for us under a lease arrangement with an unaffiliated third party Professional
Employer Organization. We hire additional employees, on a temporary or ongoing
basis, as circumstances require.
(H) Proprietary Information
We have been granted a patent for the Portable Water Filtration System
with the filter cap assembly, Patent # 5,914,045. As described in the Abstract,
it is "[a] filter assembly for a flexible, portable bottle having a sealing cap
including a filter attached to the interior of the cap to filter out
substantially all INORGANICS, ORGANICS, RADIOLOGICAL CHEMICALS AND MICROBIOLOGY.
The filter assembly also may include a second filter or Iodinator sealed in the
flexible bottle to further remove micro- organisms from water passing
there-through. The filter assembly is designed so that the flexible bottle must
be pressurized, as by being hand pressed, after it is filled with water to force
flow of water through the [sic]
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either or both of the filters. The filter in the cap includes a check valve to
allow the bottle to be re-pressurized after water has been dispensed from the
bottle."
We have recently been granted an additional patent, Patent # 6,004,460,
for the Portable Water Filtration System that allows the user to fill the bottle
from the bottom, thereby reducing any chance of contaminating the filter that is
attached to the top of the bottle. The patent is described in the abstract as
"[a] combination filter assembly and flexible portable bottle having a bottom
opening with a sealing cap attached thereto, to filter out substantially all
INORGANICS, ORGANICS, RADIOLOGICAL CHEMICALS and MICROBIOLOGY held in water in
the bottle. The filter assembly may be attached to an adapter sealed to the top
of the flexible bottle. Water in the bottle passes through the filter assembly
and out a top nozzle or valve when the flexible bottle is squeezed. The flexible
bottle is filled with water through the bottom opening." This is the technology
which we use for our Bottom's UP product line.
We also have a United States Utility Patent application, S.N.
09/144,589 for Quick Connect Diverter Valve, for which a notice of allowance was
recently received.
In addition, we have the trademark registration for "Pres to Pure,"
S.N. 75/040,704.
(I) Government Regulation
We are not, as a company, subject to any material governmental
regulation or approvals. However, our products are subject to inspection and
evaluation by regulatory authorities who have jurisdiction over water quality
standards. Such authorities are on the federal, state, and local level, both in
the United States and overseas, where we market our products. Our products have
already been inspected and evaluated by all applicable governmental authorities
in the areas in which we operate or plan to operate in the near future.
Therefore, the impact of governmental regulation is not expected to be material
to our operations.
(J) Research and Development
We have spent $41,866 and $5,741 in research and development activities
for the fiscal years ended February 28, 1999 and 1998, respectively.
(K) Environmental Compliance
At the present time we, as a company, are not subject to any material
costs for compliance with any environmental laws.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
The following discussion contains forward-looking statements regarding
our Company, its business, prospects and results of operations that are subject
to certain risks and uncertainties posed by many factors and events that could
cause our actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward- looking statements include,
without limitation: our ability to successfully develop new products for new
markets, the impact of competition on our revenues, changes in law or regulatory
requirements that
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adversely affect or preclude customers from using our products for certain
applications, delays in our introduction of new products or services, and our
failure to keep pace with emerging technologies.
When used in this discussion, words such as "believes," "anticipates,"
"expects," "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward- looking statements, which speak only as of the date of this
Registration Statement. We undertake no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by us in this Registration Statement and other reports filed
with the Securities and Exchange Commission that attempt to advise interested
parties of the risks and factors that may affect our business.
Results of Operations
During fiscal year 1998 and 1999, we experienced steady revenues from
our operations. We are currently in a profitable position as of the end of our
third fiscal quarter and continue to expand the market for our products. We
believe that the revenue growth experienced during the first nine months of our
fiscal year ended February 28, 2000 demonstrates increased acceptance of our
products from consumers. Our original plan has been to market our products to
retailers who in turn will sell these products to the public. Along with this
strategy, we have developed private label arrangements with several retailers
and programs with two multi-level marketing programs. For the remainder of this
fiscal year we intend to continue to focus on this plan.
Our revenues were relatively static for the fiscal years ended February
28, 1998 and 1999. They were $703,240 and $710,576, respectively. For the nine
months ended November 30, 1999, our revenues were $1,376,383, which compares to
$432,768 for the same nine months in 1998. The increase for the nine months
ended November 30, 1999 represents a substantial gain primarily due to an
expansion of our manufacturing capabilities and wider public acceptance of our
products. We believe that this increase follows a pattern of growth in revenue
which will continue for at least for the next twelve months.
Costs of sales include all costs incurred in the manufacturing process.
The major components of direct job costs are direct labor and associated
benefits, materials and freight. The major components of indirect job costs are
indirect labor costs and associated benefits and depreciation of production
equipment. Our costs of sales as a percentage of revenue grew for the fiscal
years ended February 28, 1998 and 1999. They were 47.2% and 56.6%, respectively.
For the nine months ended November 30, 1999, our costs of sales as a percentage
of revenue were 43.3%, which compares to 56.6% for the same nine months in 1998.
We believe that we have better control over our costs of sales and should
continue to see additional economies of scale in our manufacturing process in
the future.
Gross profit from operations was $371,496 or 52.8% for the year ended
February 28, 1998 and decreased slightly to $309,921, or 43.4% of revenue for
the year ended February 28, 1999. Gross profit from operations for the nine
months ended November 30, 1999 was $780,915 or 56.7% of revenue. This is a
significant increase in gross profit compared to the previous fiscal years and
in comparison to $187,814, or 43.4% of revenue for the nine months ended
November 30, 1998. We believe that the most recent margins better reflect what
is to be expected in the future. Earlier results were affected by the trials and
errors inherent in starting operations.
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Our general and administrative expenses were $1,233,079 for the year
ended February 28, 1999, and $727,768 for the year ended February 28, 1998. Our
general and administrative expenses were $657,102 for the nine months ended
November 30, 1999, compared to $1,026,336 for the nine months ended November 30,
1998. We have reduced a number of controllable expenses and will continue to
look for opportunities to do so in the future. However, we do not expect to see
a further substantial reduction in expenses since most of our remaining fixed
expenses cannot be further reduced. Nevertheless, we are pleased that our
expenses, and particularly our general and administrative expenses, are now in
line for us to generate an operational profit for the first time.
The major components of general and administrative expenses are office
salaries and associated payroll costs, general and health insurance costs, rent,
telephone, accounting and legal expenses.
As of the nine months ended November 30, 1999, we achieved a modest
operational profit of $42,950, compared with a loss of $855,370 for the same
period of the previous year. While modest, this operational profit represents a
substantial reversal of the previous trend in our results of operations. We
anticipate an operational profit to continue through the fiscal year end.
Liquidity and Capital Resources
Our operating activities used $684,237 during the year ended February
28, 1999, compared to $581,165 for the previous year. Our operating activities
generated $18,621 for the nine months ended November 30, 1999, compared to using
$618,146 for the nine months ended November 30, 1998. We believe that our
increased cash flows from operations result from our higher revenues and lower
general and administrative expenses.
Our investing activities used $123,447 for the year ended February 28,
1999, compared to $89,388 for the year ended February 28, 1998. Our investing
activities used $23,990 for the nine months ended November 30, 1999, compared to
$117,906 for the nine months ended November 30, 1998. All investing activities
were directed toward the purchase of property and equipment.
We had positive cash flows from financing activities for the year ended
February 28, 1999 of $286,532, compared to $1,235,820 for the year ended
February 28, 1998. These activities were essentially related to our private
placements of securities. We had no cash flows from financing activities for the
nine months ended November 30, 1999, compared to $286,532 for the nine months
ended November 30, 1998. For the nine months ended November 30, 1999, we used
internally generated cash from our activities and issued stock to settle
litigation and to pay for services.
Our net cash and cash equivalents at November 30, 1999 were $47,062,
compared to $124,053 at November 30, 1998. Our net cash and cash equivalents
decreased from $573,583 at February 28, 1998 to $52,431 at February 28, 1999.
Net accounts receivable increased to $139,852 for the year ended
February 28, 1999, compared to $13,179 for the year ended February 28, 1998.
Accounts receivable were slightly lower at $71,976 for the nine months ended
November 30, 1999, compared to $91,752 for the nine months ended November 30,
1998.
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Inventories increased to $263,869 for the year ended February 28, 1999,
compared to $74,490 for the year ended February 28, 1998. Inventories increased
to $374,842 for the nine months ended November 30, 1999, compared to $294,796
for the nine months ended November 30, 1998.
Accounts payable increased to $104,463 for the year ended February 28,
1999 from $55,719 for the year ended February 28, 1998. Accounts payable
decreased by $14,647 to $89,816 in the nine month ended November 30, 1999,
compared to an increase in the prior fiscal year of $16,416 to $72,135 for the
nine months ended November 30, 1998.
We entered into various arrangements for the settlement of outstanding
litigation during the nine months ended November 30, 1999 and incurred
substantial legal expenses during fiscal year 1999 and 1998. We expect that such
expenses will be minimized in the near term.
In July, 1999, we settled a lawsuit which we had brought against our
former Chairman, Mr. DuSean Berkich, and certain of his affiliates. Under the
terms of the settlement, Mr. Berkich and his affiliates returned a total of
4,440,666 shares of Common Stock for cancellation by us, and we released Mr.
Berkich and his affiliates from all future liability to us. In addition, a
lawsuit brought by an individual claiming consulting fees from us was dismissed
by the U.S. District Court for the District of Colorado in July, 1999.
Our financial situation continues to become healthier. However, we
still believe that we are slightly undercapitalized for the activities which we
plan to undertake in the next twelve months. Nevertheless, we believe that a
combination of profitable operations, prudent management, and new products will
permit us to show positive earnings and increasing revenues for the next twelve
months.
ITEM 3. DESCRIPTION OF PROPERTIES
As of November 30, 1999 our business office was located at 32921 Calle
Perfecto, San Juan Capistrano, CA 92675. Our telephone number at this address is
949-234-1999. We pay a total of $8,020 in rent per month for approximately
13,000 square feet of office space through March 31, 2002, escalating to $8,750
per month through January 14, 2003. We have a three-year lease with an
unaffiliated third party. We own manufacturing equipment, office equipment and
inventory.
We own two patents, a trademark, trade secrets (see Proprietary
Information above), and other proprietary information related to our business
operations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth the number of shares of our $0.001 par value
Common Stock beneficially owned by (i) each person who, as of November 30, 1999,
was known by us to own beneficially more than five percent (5%) of our Common
Stock; (ii) our individual directors and (iii) our officers and directors as a
group. As of November 30, 1999, there were a total of 8,550,046 shares of Common
Stock issued and outstanding.
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<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2) CLASS
- ------------------- --------------------------- ----------
<S> <C> <C>
The TAM Irrevocable Trust 2,100,000(3) 24.65%
4012 S. Rainbow #K111
Las Vegas, NV 80103-2012
Select Property Investments, LLC 1,400,000(4) 16.43%
4012 S. Rainbow #K111
Las Vegas, NV 80103-2012
FTS Worldwide Corp. 1,337,509 15.70%
24 Route De Malagnon
1208 Geneva, Switzerland
Carl Palmer -0- -0-
32921 Calle Perfecto
San Juan Capistrano, CA 92675
Donald S. Whitlock 40,000(5) .47%
720 East Hyman Ave., Suite 301
Aspen, CO 81611
Paul H. Lusby 152,500 1.78%
141 East Walnut Street
Pasadena, California 91103
Michelle Palmer 2,000(4) .02%
32921 Calle Perfecto
San Juan Capistrano, CA 92675
Jeffrey DeLong 82,000(6) .96%
32921 Calle Perfecto
San Juan Capistrano, CA 92675
Susan Mallett 52,000 .61%
32921 Calle Perfecto
San Juan Capistrano, CA 92675
Kenneth Rawald 62,000 .73%
32921 Calle Perfecto
San Juan Capistrano, CA 92675
All officers and directors as a Group 390,500 4.57%
(seven persons)
</TABLE>
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(1) All ownership is beneficial and of record, unless indicated otherwise.
(2) Beneficial owners listed above have sole voting and investment power with
respect to the shares shown, unless otherwise indicated.
(3) The TAM Irrevocable Trust is an irrevocable trust for the benefit certain
family members of Mr. Carl Palmer. Mr. Palmer disclaims any beneficial ownership
or interest in this Trust. In addition, this entity owns an interest in our
Series "AAA" 12% Cumulative Convertible Preferred Shares.
(4) Select Property Investments, LLC is a limited liability company owned by Ms.
Michelle Palmer, the wife of Mr. Carl Palmer. Mr. Palmer disclaims any
beneficial ownership or interest in this limited liability company. In addition,
this entity owns an interest in our Series "AAA" 12% Cumulative Convertible
Preferred Shares.
(5) Does not include 4,700 shares owned of record by the wife of Mr. Whitlock.
Mr. Whitlock disclaims any beneficial ownership or interest in these shares.
(6) Mr. DeLong, one of our former Vice Presidents, owned these shares of record
as of that date. However, we have the right to repurchase 45,000 shares at a
nominal amount, since Mr. DeLong resigned to pursue other opportunities prior to
the end of the term of his employment agreement.
Certain of these individual shareholders signed lock up agreements
which will prevent all of the shares of Common Stock from being sold or
transferred, either in the open market or in a private transaction, except based
upon the passage of time and upon defined percentage sales.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Our current directors and executive officers, their ages and present
positions held are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
- ---- --- -------------
<S> <C> <C>
Carl Palmer 65 President, Chief Executive Officer
Treasurer and Director
Paul H. Lusby 44 Secretary and Director
Donald S. Whitlock 29 Director
Michelle Rae Palmer 36 Vice President
Susan Mallett 52 Vice President - Communications
Kenneth Rawald 75 Vice President - Engineering
</TABLE>
Our directors have served and will serve in such capacity until the
next annual meeting of our shareholders and until their successors have been
elected and qualified. The officers serve at the discretion of our directors.
Except for Carl and Michelle Palmer, who are husband and wife, and Ken Rawald,
who is the father of Michelle Palmer, there are no family relationships among
the Company's officers and
12
<PAGE> 14
directors, nor are there any arrangements or understandings between any of the
directors or officers of the Company or any other person pursuant to which any
officer or director was or is to be selected as an officer or director.
CARL PALMER. Mr. Palmer has been the President, CEO and a director of
the Company since January, 1998. He is the founder of our company, innovator of
the complete line of Seychelle water filtration products and primary
spokesperson worldwide. He personally oversees every aspect of operations. He is
the inventor of twelve patented products related to water purification. Mr.
Palmer received a Bachelors Degree from Whittier College.
PAUL H. LUSBY. Mr. Lusby has been Secretary and a director of the
Company since January, 1998. For the past five years he has been a principal of
the law firm of Cooper, Kardaras & Scharf L.L.P. He has a Juris Doctor from the
University of Virginia and a Bachelor of Arts from the University of Virginia.
He has been an active member of the California Bar since 1982. He is also the
current Chairman of the Board of Pacific Clinics, a non-profit organization
dedicated to the treatment of children and adults suffering from behavioral and
mental health disorders.
DONALD S. WHITLOCK. Mr. Whitlock has been a director of our Company
since January, 1998. For the past five years, he has been a principal of
International Corporate Development, Ltd., an investment banking firm
headquartered in Aspen, Colorado. Mr. Whitlock is a Fellow of the Aspen
Institute. He has a Bachelors degree in Economics from Loyola Marymount College.
MICHELLE RAE PALMER. Ms. Palmer has been Vice President of our Company
since January, 1998. Her past and present responsibilities include all aspects
of accounting, implementation of product lines, corporate structure and
operational configurations. She was co-inventor of the Pres 2 Pure(TM) water
filtration system. She received a Bachelor of Arts Degree from California State
University, Long Beach.
SUSAN MALLETT. Ms. Mallett has been a Vice President of Communications
since March, 1998. Her past experience includes all venues of communication -
newsletters, press releases, manuals, advertisements, video and audio scripts,
training and support materials, contracts, plus public speaking, events
planning, and product development. She has extensive experience in exportation
to the Pacific Rim. She received a Bachelor of Arts degree and Teaching
Credential from California State University, Long Beach.
KENNETH RAWALD. Mr. Rawald has been a Vice President of Engineering
since January, 1998. His primary responsibilities include product design and
engineering, fixture design and assembly procedures. He provides necessary
engineering drawings as well as presentation perspective sketches in various
mediums for our Company and patent offices. He received a certification in
Engineering from Pratt Institute.
ITEM 6. EXECUTIVE COMPENSATION
Only one of our executive officers received compensation in excess of
$100,000 during the fiscal years ended February 28, 1998 or 1999. Compensation
does not include minor business-related and other expenses paid by us. Such
amounts in the aggregate do not exceed $10,000. Mr. Jeff DeLong, a former Vice
President, received a salary of $120,000 for the fiscal year ended February 28,
1999 and a car allowance of $500 per month, of which $3,500 had been paid in
cash through February 28, 1999. Mr.
13
<PAGE> 15
DeLong resigned in February, 2000 to pursue other opportunities. Our President,
Carl Palmer, received no compensation for 1998 or 1999. Mr. Palmer serves as our
President on a full-time basis.
We have granted 139,000 shares of our Common Stock as additional
compensation for the fiscal years ended 1998 and 1999.
For the fiscal years 1998 and 1999, we paid health care insurance for
our employees. We have no pension plan. We have no plans or agreements which
provide compensation in the event of a change in control. We have no plans or
agreements which provide compensation in the event of termination of employment.
We do not customarily pay members of our Board of Directors any fees
for attendance or similar remuneration, but reimburse them for any out-of-
pocket expenses incurred by them in connection with their activities.
After the 1999 fiscal year end, we granted Mr. Paul Lusby, one of our
directors, 150,000 shares of Common Stock, valued at $75,000, as consideration
for past services rendered as a member of the Board of Directors. At the same
time, we granted Mr. Donald S. Whitlock, one of our directors 40,000 shares of
Common Stock valued at $20,000 for past services rendered as a member of our
Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into a Purchase Agreement and an Amended Purchase
Agreement for the acquisition of Aqua Vision International, a private California
entity controlled by the TAM Irrevocable Trust and Select Property Investments,
LLC. The TAM Irrevocable Trust is an irrevocable trust for the benefit of
certain family members of Mr. Carl Palmer. Mr. Palmer disclaims any beneficial
ownership or interest in this Trust. Select Property Investments, LLC is a
limited liability company owned by Ms. Michelle Palmer. Mr. Palmer also
disclaims any beneficial ownership or interest in this limited liability
company. Under the terms of these agreements, these entities received 8,000
shares of Series "AAA" 12% Cumulative Convertible Preferred Shares. The Purchase
Agreement and Amended Purchase Agreement were negotiated and approved by our
Board of Directors. Every effort was made to deal on an arms-length basis.
Mr. Paul Lusby, one of our directors and shareholders, provided legal
services through his law firm for us during the 1999 fiscal year for which his
firm was compensated $2,000 in cash and 100,000 shares of Common Stock, which
was granted after the fiscal year end, with a value of $50,000. He was also
personally granted 150,000 shares of Common Stock, valued at $75,000, after the
fiscal year end as consideration for services rendered as a member of the Board
of Directors.
Mr. Donald S. Whitlock, one of our directors and shareholders, provided
advice to us, through a firm with which he is associated, on capitalization and
business development matters during the 1998 and 1999 fiscal years. The firm
with which he is associated was issued 559,266 shares at inception and was paid
$54,478 and $150,451, respectively. Subsequent to the 1999 fiscal year end, he
was personally granted 40,000 shares of common stock valued at $20,000 for
services rendered as a member of our Board of Directors.
14
<PAGE> 16
We have made advances from time to time to Mr. Carl Palmer, our
President. As of November 30, 1999 we had advanced $25,609 to him. These
advances are not compensation and will be repaid.
ITEM 8. DESCRIPTION OF SECURITIES.
We are authorized to issue 50,000,000 shares of Common Stock, par value
$0.001 per share, and 1,000,000 shares of Preferred Stock, par value $0.01 per
share. As of January 1, 2000 a total of 8,550,046 shares of Common Stock were
outstanding.
As of the same date, three classes of Preferred Stock were authorized
but only two classes were issued or outstanding: 17 shares of Series "A" 13.5%
Non Voting, Cumulative and 8,000 shares of Series "AAA" 12% Cumulative
Convertible Preferred Shares.
COMMON STOCK
The holders of Common Stock have one vote per share on all matters
(including election of directors) without provision for cumulative voting. Thus,
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors, if they choose to do so. The Common Stock is not
redeemable and has no conversion or preemptive rights.
The Common Stock currently outstanding is validly issued, fully paid
and non-assessable. In the event of our liquidation, the holders of Common Stock
will share equally in any balance of our assets available for distribution to
them after satisfaction of creditors and the holders of our senior securities,
whatever they may be. We may pay dividends, in cash or in securities or other
property when and as declared by the Board of Directors from funds legally
available therefor, but we have paid no cash dividends on our Common Stock.
PREFERRED STOCK
Under the Articles of Incorporation, the Board of Directors has the
authority to issue Preferred Stock and to fix and determine its series, relative
rights and preferences to the fullest extent permitted by the laws of the State
of Nevada and such Articles of Incorporation. As of the date of this
Registration Statement, three classes of Preferred Stock were authorized, but
only two were issued or outstanding.
Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock
Such Stock has rights which are superior to all other securities of the
Company, including upon liquidation and as to payment of dividends, if any. The
Series "A" Preferred carries a dividend of 13.5% per annum, is non-voting, and
is redeemable by us at any time at face value and is convertible into Common
Stock at the lesser of $10 per share or 85% of the last five closing bid prices.
A total of 17 shares are issued and outstanding as of the date of this
Registration Statement.
Series "AA" Non Voting, Cumulative, Convertible Preferred Stock
Such Stock had rights which were superior to all other securities of
the Company except to Series "A" 13.5% Non Voting, Cumulative, Convertible
Preferred Stock, including upon liquidation and as to payment of dividends, if
any. The Series "AA" Preferred carried a dividend which was set by the Board of
15
<PAGE> 17
Directors at 10% prior to the time of issuance thereof, was non-voting,
redeemable by the Company at any time at face value and was convertible into
Common Stock of the Company at 85% of the last five closing bid prices. We had
previously issued 26 shares of the Preferred Stock. As of the date of this
Registration Statement, all of the Series "AA" Non Voting, Cumulative,
Convertible Preferred Stock had been converted to Common Stock. This Series "AA"
is no longer issued or outstanding. A total of 1,337,509 shares of Common Stock
were issued upon conversion, including for accrued interest.
Series "AAA" 12% Cumulative Convertible Preferred Shares
Such Stock has rights which are superior to all other securities of the
Company except Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred
Stock and, before its conversion, the Series "AA" Non Voting, Convertible
Preferred Stock, including upon liquidation and as to payment of dividends, if
any. The Series "AAA" Cumulative Convertible Preferred Voting Stock carries a
12% per annum dividend payable in stock or cash, is voting, with each share
equal to 100 shares of Common Stock, and is redeemable according to the
following procedure: upon written notice of conversion from the holders, the
Company shall have the right, but not the obligation, for 45 days from receipt
of such notice to repurchase, for cash, up to 2,000 shares of the Series "AAA"
12% Cumulative Convertible Preferred Shares at $1,000 per share.
Pursuant to the terms of the Amended Purchase Agreement, the number of
shares of Common Stock issuable to the holders pursuant to the conversion
provisions of the Series "AAA" 12% Cumulative Convertible Preferred Shares was
reduced from 8,000,000 shares to 4,500,000 shares (subject to pro rata
adjustments, if any, for stock dividends, stock splits, reverse stock splits,
and any other similar capital stock adjustments of a general nature). At the
date of this Registration Statement, there are 8,000 shares issued and
outstanding.
We do not plan to issue any other Preferred Stock in the foreseeable
future.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
(A) Principal Market or Markets
Our Common Stock began trading in 1987. Since the consummation of the
Exchange Agreement between the Company and SWT, market makers and other dealers
have provided bid and ask quotations of our Common Stock under the symbol
"SYEV." Trading is conducted in the over-the-counter market on the NASD's
"Electronic Bulletin Board."
The table below represents the range of high and low bid quotations of
our Common Stock as reported during the reporting period herein. The following
bid price market quotations represent prices between dealers and do not include
retail markup, markdown, or commissions; hence, they may not represent actual
transactions.
16
<PAGE> 18
<TABLE>
<CAPTION>
Fiscal Year 1999 High Low
---- ---
<S> <C> <C>
First Quarter $2.25 $0.50
Common Shares
Second Quarter $1.75 $0.91
Common Shares
Third Quarter $0.97 $0.53
Common Shares
Fourth Quarter $0.69 $0.34
Common Shares
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1998 High Low
---- ---
<S> <C> <C>
First Quarter $20.00 $1.88
Common Shares
Second Quarter $2.43 $0.75
Common Shares
Third Quarter $1.13 $0.49
Common Shares
Fourth Quarter $0.69 $0.35
Common Shares
</TABLE>
(B) Approximate Number of Holders of Common Stock
As of November 30, 1999, a total of 8,550,046 of our shares of
Common Stock were outstanding and 273 holders of record owned these shares.
However, we believe that we have a significantly greater number of shareholders
because a substantial number of our shares are held in nominee name. The number
of outstanding shares is computed after the approximate 4,400,666 shares of
Common Stock which have been canceled by us a result of the settlement of the
lawsuit with the former Chairman of the Company and certain of his affiliates.
(C) Dividends
Holders of Common Stock are entitled to receive such dividends as
may be declared by our Board of Directors. No dividends on the Common Stock were
paid by us during the periods reported herein nor do we anticipate paying
dividends in the foreseeable future.
17
<PAGE> 19
ITEM 2. LEGAL PROCEEDINGS.
No legal proceedings of a material nature to which we are a party are
pending, and we know of no legal proceedings of a material nature pending or
threatened or judgments entered against any director or officer of the Company
in his capacity as such.
In July, 1999, we settled a lawsuit which we had brought against our
former Chairman, Mr. DuSean Berkich, and certain of his affiliates. Under the
terms of the settlement, Mr. Berkich and his affiliates returned a total of
4,440,666 shares of Common Stock for cancellation by us, and we released Mr.
Berkich and his affiliates from all future liability to us.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
We did not have any disagreements on accounting and financial
disclosures with our accounting firm during the reporting period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Between its incorporation in February 1997 and January 30, 1998, SWT
issued securities in the amounts and for the aggregate consideration as listed
as follows. All shares were acquired directly from SWT except where indicated
below:
<TABLE>
<CAPTION>
Name Number of Shares Price
- ---- -----------------------------
<S> <C> <C>
Aribi, Robbi 3,000 $.001
Barie, Julie 1,000 $.001
Beadelston, Marina 1,333 $.001
Berkich Limited Partners* 3,500,000 $.001
Berkich, Cynthia L.* 15,000 $.001
Berkich, Donald B.* 15,000 $.001
Berkich, DuSean* 800,000 $.001
Berkich, John* 1,000 $.001
Berkich, Judy* 15,000 $.001
Berkich, Rebecca, L.* 15,000 $.001
Blake, Peter 2,000 $.001
Bowden, Bob 2,000 $.001
Brownell, Veronica 25,000 $.001
Casper, Brandy 6,700 $.001
Davidson, Gary 12,000 $0.42
Delong, Jeffrey Foster 80,000 $.001
Dunn, Lawrence 5,000 $4.00
Duplan, Stefan Debelle 5,000 $.001
Erdman, Colin 1,000 $.001
Farver, Suzanne 6,700 $.001
Frederick, William 30,000 $.001
Gaydos, Chad 14,000 $.001
Grasso, Diane 2,500 $.001
</TABLE>
18
<PAGE> 20
<TABLE>
<S> <C> <C>
Hammel, Charles & Cathy (JTROS) 24,000 $.001
Helvey, Casey 10,000 $.001
Helvey, Lindsay 10,000 $.001
Holstein, Phil 5,000 $.001
International CorporateDevelopment, Ltd. 116,250 $.001
Intresco Ltd 25,000 $.001
Jenkins, Lorna 1,000 $.001
Jones, Michael 1,000 $.001
Kam, Raymond** 144,000 $.001
Kearns, Michael 243,000 $.001
Kikuyama, Kendall** 12,000 $.001
Laymac, John 77,000 $.001
Larson, Jim 80,000 $.001
Lippert, Eric 20,000 $.001
Lupo, Thomas M.* 80,000 $.001
Lusby, Paul 2,500 $.001
MacKinney, Mary 2,500 $.001
Macre, Thomas 20,000 $.001
McDougall, John 3,333 $.001
Mason Trust** 3,750 $.001
Murakami, Mitsuo or Ema** 24,000 $.001
Murakami, David** 24,000 $.001
Nanniga, Alison 371,250 $.001
Otta, David S.* 15,000 $.001
Otta, Mark W.* 15,000 $.001
Palmer, Cari 279,000 $.001
Patterson, Mark 10,000 $.001
Rawald, Kenneth 10,000 $.001
Rawald, Marie 5,000 $.001
Roby, James 3,334 $.001
Rojo, Louis Napolean 30,000 $.001
Salet, Willy 10,000 $.001
Sax Family Trust 1,667 $.001
Schwartz, Hans 2,000 $.001
Silver, Joseph 3,333 $.001
Select Property Investments, LLC 1,400,000 $.001
Stanberry, Dan 2,600 $.001
Solinap, Wilhelmina 1,000 $.001
STG - Coopers & Lybrand 62,500 $4.00
Suchor, Sandra A 7,200 $0.42
Swiss American Securities Co 180,000 $3.96
The Tam Irrevocable Trust 2,100,000 $.001
Ulrich, George* 100,000 $.001
Ulrich, Michael* 10,000 $.001
Wagner, David 180,000 $.001
Wagner & Assoc. Money Pur. Plan 12,500 $.001
Wagner & Assoc. Profit Sharing Plan 12,500 $.001
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C> <C>
Wagner, Diana 20,000 $.001
Warner, James 6,000 $.001
Whitlock, Debbie 60,000 $.001
Whitlock, Donald S. 93,750 $.001
Whitlock, Donald A. 12,000 $.001
Whitlock, Donald S. 138,600 $.001
Whitlock, Tim 4,927 $.001
Wiles, Grace 54,000 $.001
Work, Horace 6,666 $.001
Wright, Doug** 1,250 $.001
Yafuso, Alvin** 12,000 $.001
Zeimer, David* 100,000 $.001
</TABLE>
* All or part of these shares have been canceled.
** These individuals acquired their shares directly from, and paid consideration
directly to, Mr. DuSean Berkich, who was an officer and a director of us at
the time.
On January 30, 1998, we entered into an Exchange Agreement with SWT,
whereby we exchanged our issued and outstanding capital shares with the
shareholders of SWT on a one share for one share basis, with us becoming the
parent company and SWT becoming a wholly-owned subsidiary.
During the three years prior to the date of this Registration
Statement, we had issued and sold unregistered securities as Royal Net, Inc. for
$.001 per share consideration, in the amounts and at the times listed as
follows:
<TABLE>
<CAPTION>
Name Number of Shares Date
------------------------------------------------------------------
<S> <C> <C>
Anthony Eames 2,500,000 7/02/96
Thomas Eames 2,500,000 7/02/96
Garth Jacobson 2,500,000 7/02/96
</TABLE>
As a part of the Exchange Agreement between SWT and us, these shares
and all other issued and outstanding shares of Common Stock of Royal Net were
reverse split one-for-five and then a total of 1,413,597 shares of our post
split Common Stock were canceled. At the time of the Exchange Agreement, there
were no more than 300,000 shares of Common Stock issued and outstanding in Royal
Net.
Subsequent to the Exchange Agreement, we have issued securities in the
amounts, at the times, and for the amounts of consideration listed as follows:
Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock
A total of 17 shares for $850,000 were sold effective January 31, 1998
to Rohm and Bodmer.
Series "AA" Non Voting, Cumulative, Convertible Preferred Stock
A total of 26 shares for $1,300,000 were sold effective March 27, 1998
to FTS Worldwide Corporation. These shares were converted on June 14, 1999 into
1,337,509 shares of Common Stock.
20
<PAGE> 22
Series "AAA" 12% Cumulative Convertible Preferred Shares
On January 31, 1998, we entered into a Purchase Agreement to acquire
all of the assets of Aqua Vision International, a California sole
proprietorship. This Purchase Agreement was amended on February 26, 1999 to
provide for the issuance of 8,000 shares of Series "AAA" 12% Cumulative
Convertible Preferred Shares in lieu of all consideration which then remained
unpaid under the original Purchase Agreement.
Common Stock
In March, 1998, we sold 62,500 restricted shares of Common Stock for
$250,000 to Harvel, Limited. We also issued 18,500 restricted shares of Common
Stock to Rick Emmett in cancellation of a promissory note held by him.
On April 1, 1999, we granted shares of Common Stock valued at $.50 per
share to the following individuals and entities in the amounts indicated below:
<TABLE>
<CAPTION>
Name Number of Shares
--------------------------------------------------------------
<S> <C>
Jeff DeLong 2,000
Susan Mallett 52,000
Michelle Rae Palmer 2,000
Ken Rawald 52,000
Louis N. Rojo 22,000
Arturo & Maria Villafuerte 7,000
Horn & Loomis 75,000
David Wagner & Associates, P.C 100,000
Cooper, Kardaras & Scharf L.L.P 100,000
Wickens, Herzer & Panza 50,000
Donald S. Whitlock 40,000
Paul H. Lusby 150,000
</TABLE>
On July 1, 1999, we issued shares of Common Stock valued at $.50 per
share to the following individuals in the amounts indicated below:
<TABLE>
<CAPTION>
Name Number of Shares
--------------------------------------------------------------
<S> <C>
Grace Wiles 2,000
Israel Marelus 75,000
</TABLE>
We believe that most of the offers and sales described above were
exempt from registration pursuant to Rule 504 of Regulation D under the
Securities Act because those offers and sales met all the conditions of Rule 504
as then in effect, including the dollar limitation, and we were not at the time
of such transactions within any of the categories of issuers prohibited from
using Rule 504.
In addition to the Rule 504 exemptions described above, the foregoing
sales of Common Stock and Preferred Stock were also made in reliance upon the
exemptions from registration set forth in Sections 4(2) and 4(6) of the
Securities Act of 1933 and/or Regulation S promulgated thereunder for
transactions not involving a public offering. No underwriters were engaged in
connection with the foregoing sales of
21
<PAGE> 23
securities. These sales were made without general solicitation or advertising.
Each purchaser was an "accredited investor" or a sophisticated investor with
access to all relevant information necessary to evaluate the investment who
represented to SWT or to us, as the case may be, that the shares were being
acquired for investment.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation authorize the Board of Directors, on
behalf of the Company and without shareholder action, to exercise all of the
Company's powers of indemnification to the maximum extent permitted under the
applicable statute. The Nevada Private Corporations Act allows indemnification
of directors, officers, employees and agents of the Company, including the
advancement of expenses:
Section 78.751 of the Nevada Private Corporations Act provides:
1. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonable incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. Indemnification may not be made for any
claim, issue or matter as to which such person shall have been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction, determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1. and 2., or in
22
<PAGE> 24
defense of any claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
4. Any indemnification under subsections 1. and 2., unless ordered by a court or
advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made: (a) By the stockholders; (b) By the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding; (c) If a majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion; (d) If a quorum
consisting of directors who were not parties to the act, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the corporation. The provisions of this subsection do not affect
any rights to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by a
court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles or incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his
official capacity or an action in another capacity while holding such
office, except that indemnification, unless ordered by a court pursuant
to subsection 2 or for the advancement of expenses made pursuant to
subsection 5, may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or omissions
involved intentional misconduct, fraud or knowing violation of the law
and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors,
and administrators of such a person.
The indemnification discussed herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under the Articles
of Incorporation, any Bylaw, agreement, vote of shareholders, or disinterested
directors, or otherwise, and any procedure provided for by any of the foregoing,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of
heirs, executors, and administrators of such a person.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of our
Company under to the preceding provisions, or otherwise, we have 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
23
<PAGE> 25
for indemnification against such liabilities (other than the payment by the
Registrant of expense 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 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.
24
<PAGE> 26
Consolidated Audited Financial Statements
Seychelle Environmental Technologies, Inc.
Years Ended February 28, 1999 and 1998
<PAGE> 27
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-2 to F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity F-5 to F-7
Consolidated Statements of Cash Flows F-8 to F-9
Notes to Consolidated Financial Statements F-10 to F-24
</TABLE>
<PAGE> 28
[RAIMONDO PETTIT GROUP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Seychelle Environmental Technologies, Inc.
San Clemente, California
We have audited the accompanying consolidated balance sheet of Seychelle
Environmental Technologies, Inc. as of February 28, 1999, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years ended February 28, 1999 and 1998. The consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Seychelle Environmental Technologies, Inc. as of February 28, 1999 and the
consolidated results of their operations and their cash flows for the two years
then ended, in conformity with generally accepted accounting principles.
RAIMONDO PETTIT GROUP
Torrance, California
August 10, 1999
F-1
<PAGE> 29
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, February 28,
1999 1999
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 47,062 $ 52,431
Trade receivable, net of allowance for doubtful
accounts of $5,179 and $6,861, respectively 71,976 139,852
Inventories 374,842 263,869
Other current assets 20,000 17,292
------------- -------------
Total current assets 513,880 473,444
------------- -------------
Property and equipment, net 180,528 222,283
Intangible assets, net 10,658 8,948
Other non-current assets 21,141 8,650
------------- -------------
Total non-current assets 31,799 17,598
------------- -------------
TOTAL ASSETS $ 726,207 $ 713,325
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE> 30
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
November 30, February 28,
1999 1999
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 89,816 $ 104,463
Accrued expenses 241,663 481,952
Customer deposits 8,380 8,334
Note payable -- 31,530
Other current liabilities 6,500 --
------------- -------------
Total current liabilities 346,359 626,279
------------- -------------
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value - 1,000,000 shares authorized,
Series A, non-voting, cumulative, convertible preferred
stock, 17 shares issued and outstanding 0 0
Series AA, non-voting, cumulative, convertible preferred
stock, 0 and 26 shares, respectively, issued and outstanding -- 0
Series AAA, preferred stock, 8,000 shares issued and
outstanding 80 80
Common stock, $.001 par value - 50,000,000 shares authorized;
8,550,046 and 11,200,643 shares issued and outstanding 8,550 11,201
Additional paid-in capital 2,028,050 1,773,526
Accumulated deficit (1,631,223) (1,674,173)
Receivable from stockholder (25,609) (23,588)
------------- -------------
Total stockholders' equity 379,848 87,046
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 726,207 $ 713,325
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 31
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the nine months For the years
ended November 30, ended February 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
SALES $ 1,376,383 $ 432,768 $ 710,576 $ 703,240
COST OF SALES 595,468 244,954 400,655 331,744
------------ ------------ ------------ ------------
GROSS PROFIT 780,915 187,814 309,921 371,496
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling 80,863 46,848 144,072 279,079
General and administrative 657,102 1,026,336 1,233,079 727,768
------------ ------------ ------------ ------------
TOTAL EXPENSES 737,965 1,073,184 1,377,151 1,006,847
------------ ------------ ------------ ------------
PROFIT (LOSS) FROM OPERATIONS 42,950 (885,370) (1,067,230) (635,351)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Miscellaneous income (expense) -- -- (5,707) (100,000)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) -- -- (5,707) (100,000)
------------ ------------ ------------ ------------
PROFIT (LOSS) BEFORE PROVISION
FOR INCOME TAXES 42,950 (885,370) (1,072,937) (735,351)
------------ ------------ ------------ ------------
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET PROFIT (LOSS) $ 42,950 $ (885,370) $ (1,072,937) $ (735,351)
------------ ------------ ------------ ------------
BASIC AND DILUTED PROFIT (LOSS)
PER SHARE $ (.01) $ (.09) $ (0.12) $ (0.09)
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF
SHARES: BASIC AND DILUTED 9,525,863 11,200,643 11,200,643 8,416,686
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 32
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES SEYCHELLE WATER
("SET") formerly RoyalNet Technologies ("SWT")
------------------------------------------------------------ -----------------------------
Preferred Stock Common Stock Common Stock
----------------------------- ----------------------------- -----------------------------
Shares Amount Shares Amount Shares Amount
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 1, 1997 -- $ -- -- $ -- -- $ --
Issuance of Seychelle Water
Technologies common stock -- -- -- -- 8,024,927 8,025
Issuance of SWT common
stock in connection with
Regulation D offering, net of
issuance costs of $64,899 -- -- -- -- 2,794,716 2,795
Issuance of SWT common
stock in satisfaction of note
payable -- -- -- -- 18,500 19
Issuance of SWT common
stock in connection with
Private Placement, net of
issuance costs of $16,390 -- -- -- -- 62,500 62
Aquavision owners net
contribution
Reverse merger of SWT with
SET -- -- 11,200,643 11,201 (10,900,643) (10,901)
Capital Distribution -- -- -- -- -- --
Issuance of Series A Preferred
Stock, net of issuance costs
of $138,251 17 -- -- -- -- --
Net Loss for the year ended
February 28, 1998 -- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Balance, February 28, 1998 17 $ -- 11,200,643 $ 11,201 -- $ --
------------- ------------- ------------- ------------- ------------- -------------
<CAPTION>
Retained Stock Subscription Total
Additional Earnings Receivable and Stockholders'
Paid-In (Accumulated Stockholder Equity
Capital Deficit) Receivable (Deficit)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, March 1, 1997 $ 39,651 $ 134,115 $ -- $ 173,766
Issuance of Seychelle Water
Technologies common stock (25) -- -- 8,000
Issuance of SWT common
stock in connection with
Regulation D offering, net of
issuance costs of $64,899 924,973 -- -- 927,768
Issuance of SWT common
stock in satisfaction of note
payable 37,620 -- -- 37,639
Issuance of SWT common
stock in connection with
Private Placement, net of
issuance costs of $16,390 233,548 -- -- 233,610
Aquavision owners net
contribution (70,168) -- -- (70,168)
Reverse merger of SWT with
SET (300) -- -- --
Capital Distribution (200,000) -- -- (200,000)
Issuance of Series A Preferred
Stock, net of issuance costs
of $138,251 711,749 -- (149,983) 561,766
Net Loss for the year ended
February 28, 1998 -- (735,351) -- (735,351)
------------- ------------- ------------- -------------
Balance, February 28, 1998 $ 1,677,048 $ (601,236) $ (149,983) $ 937,030
------------- ------------- ------------- -------------
</TABLE>
F-5
<PAGE> 33
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
Seychelle Environmental Technologies Seychelle Water
("SET") formerly RoyalNet Technologies ("SWT")
---------------------------------------------------- -----------------------
Preferred Stock Common Stock Common Stock
------------------------ ------------------------ -----------------------
Shares Amount Shares Amount Shares Amount
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 1, 1998 17 $ -- 11,200,643 $ 11,201 -- $ --
Payment of stock subscription
receivable -- -- -- -- -- --
Issuance of Series AA Preferred
Stock, net of issuance costs
of $211,442 26 -- -- -- -- --
Issuance of Series AAA Pre-
ferred Stock 8,000 80 -- -- -- --
Capital Distribution -- -- -- -- -- --
Receivable from stockholder -- -- -- -- -- --
Net Loss for year ended
February 28, 1999 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Balance, February 28, 1999 8,043 $ 80 11,200,643 $ 11,201 -- $ --
Shareholder advances (unaudited) -- -- -- -- -- --
Conversion of AA preferred stock to
common stock (unaudited) (26) -- 1,337,509 1,338 -- --
Issuance of common stock in connection
with settlement of lawsuit (unaudited) -- -- 100,000 100 -- --
Issuance of common stock for compen-
sation in connection with 504 offering
(unaudited) -- -- 327,000 327 -- --
Cancellation of common stock of former
consultant (unaudited) -- -- (80,000) (80) -- --
Cancellation of common stock in con-
nection with Berkich lawsuit (unaudited) -- -- (4,440,666) (4,441) -- --
<CAPTION>
Retained Stock Subscription Total
Additional Earnings Receivable and Stockholders'
Paid-In (Accumulated Stockholder Equity
Capital Deficit) Receivable (Deficit)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance, March 1, 1998 $ 1,677,048 $ (601,236) $ (149,983) $ 937,030
Payment of stock subscription
receivable -- -- 149,983 149,983
Issuance of Series AA Preferred
Stock, net of issuance costs
of $211,442 1,088,558 -- -- 1,088,558
Issuance of Series AAA Pre-
ferred Stock (80) -- -- --
Capital Distribution (992,000) -- -- (992,000)
Receivable from stockholder -- -- (23,588) (23,588)
Net Loss for year ended
February 28, 1999 -- (1,072,937) -- (1,072,937)
--------------- --------------- --------------- ---------------
Balance, February 28, 1999 $ 1,773,526 $ (1,674,173) $ (23,588) $ 87,046
Shareholder advances (unaudited) -- -- (2,021) (2,021)
Conversion of AA preferred stock to
common stock (unaudited) (1,338) -- -- --
Issuance of common stock in connection
with settlement of lawsuit (unaudited)- 20,213 -- -- 20,313
Issuance of common stock for compen-
sation in connection with 504 offering
(unaudited) 163,173 -- -- 163,500
Cancellation of common stock of former
consultant (unaudited) 80 -- -- --
Cancellation of common stock in con-
nection with Berkich lawsuit (unaudited)- 4,441 -- -- --
</TABLE>
F-6
<PAGE> 34
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
Seychelle Environmental Technologies Seychelle Water
("SET") formerly RoyalNet Technologies ("SWT")
----------------------------------------------------- -------------------------
Preferred Stock Common Stock Common Stock
------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
commissions (unaudited) -- $ -- 75,000 $ 75 -- $ --
Issuance of common stock in consi-
deration for settlement of note
payable (unaudited) -- -- 30,560 30 -- --
Net income for the period ended
(unaudited) -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, November 30, 1999 8,017 $ 80 8,550,046$ $ 8,550 -- $ --
=========== =========== =========== =========== =========== ===========
<CAPTION>
Retained Stock Subscription Total
Additional Earnings Receivable and Stockholders'
Paid-In (Accumulated Stockholder Equity
Capital Deficit) Receivable (Deficit)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Issuance of common stock for
commissions (unaudited) $ 37,425 $ -- $ -- $ 37,500
Issuance of common stock in consi-
deration for settlement of note
payable (unaudited) 30,530 -- -- 30,560
Net income for the period ended
(unaudited) -- 42,950 -- 42,950
----------------- ----------------- ----------------- -----------------
Balance, November 30, 1999 $ 2,028,050 $ (1,631,223) $ (25,609) $ 379,848
================= ================= ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 35
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months For the Years Ended
Ended November 30, February 28,
1999 1998 1999 1998
---------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net profit (loss) $ 42,950 $ (885,370) $(1,072,937) $ (735,351)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 70,989 44,613 60,598 28,683
Provision for doubtful accounts 6,349 12,539 6,861 167
Notes issued for services -- -- 2,707 28,820
Stock issued for services -- 235,891 -- 38,989
Write down carrying value of
receivable from shareholder -- -- 6,525
Write off carrying value of
investment in joint venture -- -- 8,000
Loss on sale of equipment 1,256 -- -- --
Increase (decrease) resulting
from changes in:
Accounts receivable 61,527 (91,112) (133,534) (9,588)
Inventory (110,973) (220,306) (189,379) 90,100
Prepaid assets (2,708) 4,789 (11,082) (6,210)
Receivable from shareholders (2,021) 160,912 160,912 22,291
Other assets (14,201) 11,464 (4,140) (11,750)
Accounts payable (14,647) 16,416 48,744 (3,129)
Accrued liabilities (19,946) 83,684 438,679 5,774
Customer deposits 46 8,334 8,334 (44,486)
--------- ---------- ----------- -----------
Net cash (used in) provided by
operating activities 18,621 (618,146) (684,237) (581,165)
--------- ---------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (23,990) (117,906) (123,447) (89,388)
--------- ---------- ----------- -----------
Net cash used in investing activities (23,990) (117,906) (123,447) (89,388)
--------- ---------- ----------- -----------
</TABLE>
F-8
<PAGE> 36
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months For the Years Ended
Ended November 30, February 28,
1999 1998 1999 1998
---------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES:
Issuance of common stock $ -- $ -- $ -- $1,242,642
Issuance of preferred stock -- 1,300,000 1,300,000 700,018
Cash paid for capital transaction
fees -- (171,451) (171,451) (220,834)
Cash proceeds from stock
subscriptions receivable -- 149,983 149,983 --
Equity draws and distributions -- (992,000) (992,000) (486,006)
--------- ---------- ---------- ----------
Net cash provided by financing
activities -- 286,532 286,532 1,235,820
--------- ---------- ---------- ----------
Net change in cash and cash
equivalents (5,369) (449,520) (521,152) 565,267
Cash and cash equivalents,
beginning of period 52,431 573,583 573,583 8,316
--------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 47,062 $ 124,053 $ 52,431 $ 573,583
========= ========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
CASH PAID DURING THE PERIOD
FOR:
Interest $ 2,682 $ -- $ -- $ 7,592
Income Taxes $ -- $ -- $ -- $ 800
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Notes issued for services $ -- $ 6,861 $ 6,861 $ 28,820
Stock issued for services and
settlement of litigation $ 223,025 $ -- $ -- $ 38,989
Stock issued for settlement
of debt $ 31,530 $ -- $ -- $ --
========= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 37
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
Seychelle Environmental Technologies, Inc. ("SET"), a Nevada corporation, was
formed in 1998 for the purpose of merging into and surviving the former
RoyalNet, Inc., a Utah shell corporation, formed in 1986.
Seychelle Water Technologies ("SWT") was formed in February 1997 under the laws
of the state of Nevada for the purpose of marketing the products of Aquavision,
a sole proprietorship operating since 1996. Prior to January 1998, SWT
operations were limited primarily to fundraising activities.
On January 30, 1998, SET entered into a stock exchange agreement with SWT,
whereby SWT shareholders emerged as the majority stockholder of SET. This
reverse acquisition resulted in SWT becoming a wholly-owned subsidiary of SET.
On January 31, 1998, SET purchased the assets of Aquavision for $9.5 million.
Only $1.2 million was paid to the Aquavision owners and the transaction was not
consummated. Effective February 28, 1999, the Company revised its Purchase
Agreement and issued 8,000 shares of its Series AAA Preferred Stock (described
in Note 7) to Aquavision's owners. The Company sued its controlling stockholder
and, subsequent to year end, the controlling stockholder returned his shares to
the Company (see Note 11). As a result, Aquavision's owners became the ultimate
controlling stockholder of SET. Accordingly, the above transactions were treated
as a reverse acquisition where SWT and Aquavision are the accounting acquirors,
and are included in the accompanying consolidated financial statements at their
historical bases. Because the assets were acquired from existing shareholders,
the $1.2 million payment was treated as a distribution and the Series AAA stock
issuance was treated as a recapitalization. Costs to acquire SET ($100,000) were
expensed as period costs.
F-10
<PAGE> 38
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
Description of Business
SET develops, manufacturers and sells water filtration products through
retailers and multilevel marketing programs. The Company sells its products
throughout the United States and abroad including Europe and Asia. Geographic
information is as follows:
<TABLE>
<CAPTION>
For the Years Ended February 28,
1999 1998
------------- -------------
<S> <C> <C>
Water filtration products sold to
external customers (1) (2) in:
the United States $ 666,139 $ 534,762
Europe and Asia 40,510 131,790
Canada 3,927 36,688
----------- ----------
Total $ 710,576 $ 703,240
=========== ==========
</TABLE>
(1) Sales to external customers are attributed based on the country of
residence of the customer.
(2) There are no long lived assets outside the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Estimates
The preparation of the consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of SET
(formerly known as RoyalNet), its wholly-owned subsidiary, SWT, and the
operations of Aquavision through the date of the merger, (collectively, the
"Company"). All significant intercompany transactions and balances have been
eliminated.
F-11
<PAGE> 39
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Sales are recognized upon shipment of the products.
Cash and Cash Equivalents
The Company considers short-term investments which have maturities of three
months or less at the date of acquisition to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market using the average cost
method.
Property and Equipment
Property and equipment, including significant improvements thereto, are stated
at cost and are depreciated using the straight-line method over an estimated
useful life of 5 years. Maintenance and repairs are charged to expense as
incurred.
Intangible Assets
Intangible assets include patents, product rights and technology costs. All
patent, product rights and technology costs are capitalized and amortized over
ten years using the straight-line method. The Company assesses whether there has
been a permanent impairment of the value of intangible assets by considering
factors such as expected future product revenues, anticipated product demand and
prospects and other economic factors. Total intangible assets amounted to
$8,948, net of $0 accumulated amortization at February 28, 1999.
Impairment of Long-Lived Assets
Management periodically reviews the realizability of long-lived assets based on
an evaluation of remaining useful lives, cash flows and profitability
projections and has determined that there is no impairment at February 28, 1999.
F-12
<PAGE> 40
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development Expenses
Research and development costs are expensed as incurred and amounted to $41,866
and $5,741 for the years ended February 28, 1999 and 1998, respectively.
Advertising Expenses
Advertising expenses are expensed as incurred. Total advertising expenses
amounted to $40,455 and $258,356 for the years ended February 28, 1999 and 1998.
Risk Concentrations
The Company places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of the FDIC
insurance limit.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables generally are
due in 30 days. Credit losses have consistently been within management's
expectations. An allowance for doubtful accounts is recorded when it is probable
that all or a portion of the receivables balance will not be collected.
During fiscal 1999 and 1998, the Company derived approximately 27% and 23% of
its net sales from one and two of its major customers, respectively. At year end
1999 and 1998, these major customers accounted for approximately 43% and 1% of
accounts receivable.
Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes," which requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the consolidated financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the consolidated financial statements and the tax basis of
assets and liabilities using enacted rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
F-13
<PAGE> 41
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loss Per Common Share
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per
Share." This new standard requires dual presentation of basic and diluted
earnings per share ("EPS") on the face of the statement of income and requires
reconciliation of the numerators and the denominators of the basic and diluted
EPS calculations.
Basic net loss per common share is computed by dividing net loss by the weighted
average number of outstanding common shares during the periods presented. For
purposes of SFAS No. 128, basic loss per share and diluted loss per share are
the same amount as the impact of additional common shares that might have been
issued under the Company's stock option plan, warrants and convertible debt
would be anti-dilutive.
Fair Value of Financial Instruments
The carrying value of financial instruments included in current assets and
liabilities approximates fair value because of the short maturity of these
items.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded in
accordance with Accounting Principles Board Opinion ("APBO") No. 16, "Business
Combinations" and SFAS No. 123, "Accounting for Stock-Based Compensation", at
the fair market value of the stock issued or the fair market value of the
services provided, whichever value is the more clearly evident.
Stock Compensation Plan
SFAS No. 123 encourages, but does not require, companies to record compensation
cost for stock-based employee compensation plans at fair value. The Company
elected to account for stock-based compensation using the intrinsic value method
prescribed in APBO No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.
F-14
<PAGE> 42
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires presentation of comprehensive income
within an entity's primary financial statements. Comprehensive income is defined
as net income as adjusted for changes to equity resulting from events other than
net income or transactions related to an entity's capital structure.
Comprehensive income equaled net income for all periods presented.
Segment Disclosures
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments and establishes standards for related disclosures about product and
services, geographic areas, and major customers. At this time, the Company has
only one segment.
Unaudited Interim Financial Information
The accompanying interim consolidated balance sheet as of November 30, 1999 and
the consolidated statements of operations, changes in stockholders' equity and
cash flows for the nine months ended November 30, 1999 and 1998, together with
the related notes are unaudited and include all normal recurring adjustments
that the Company considers necessary. Inventories and cost of goods sold have
been estimated based on the purchases and sales from the most recent physical
inventory. Results for the nine months ended November 30, 1999 and 1998 are not
necessarily indicative of results for an entire year.
3. INVENTORIES
At February 28, 1999, inventories consist of:
<TABLE>
<S> <C>
Raw Materials $ 219,902
Work In Progress 16,620
Finished goods 27,347
---------
$ 263,869
=========
</TABLE>
F-15
<PAGE> 43
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated
depreciation as of February 28, 1999:
<TABLE>
<S> <C>
Tooling $ 238,056
Equipment 12,090
Vehicles 45,600
Furniture and fixtures 12,400
Computer equipment 18,116
Leasehold improvements 2,975
---------
$ 329,237
Accumulated depreciation 106,954
---------
$ 222,283
=========
</TABLE>
Total depreciation expense for the years ended February 28, 1999 and 1998 was
$60,598 and $28,683, respectively.
5. ACCRUED EXPENSES
Accrued expenses consist of:
<TABLE>
<S> <C>
Accrued legal expenses and settlements $ 182,813
Accrued wages and benefits 105,885
Accrued outside services 95,000
Accrued consulting fees 37,500
Other accrued expenses 60,754
----------
$ 481,952
=========
</TABLE>
The accrued legal expenses and settlements represent the amounts the Company
agreed to pay in connection with various litigation along with accrued
attorneys' fees related to these actions.
F-16
<PAGE> 44
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. ACCRUED EXPENSES (CONTINUED)
During fiscal 1999, the Company replaced all of its employees with leased
employees from a Professional Employer Organization (PEO). The accrued wages and
benefits represent amounts due to the PEO for the outstanding amounts due at
February 28, 1999.
Of the $481,952 in accrued expenses, $384,733 were settled after year end
through the issuance of 829,000 shares of common stock of which, 502,000 shares
had been issued by November 30, 1999.
6. NOTES PAYABLE
At February 28, 1998, $25,034 principal plus $6,496 in accrued interest at 10%
per annum was due on a convertible note which matured July 1, 1998. In November
1999, the note was renegotiated and as such will be repaid by the issuance of
30,560 shares of common stock and payment of $2,503.
7. CAPITAL STRUCTURE
Common Stock
The holders of Common Stock have one vote per share on all matters (including
election of Directors) without provisions for cumulative voting. The Common
Stock is not redeemable and has no conversion or preemptive rights.
In the event of liquidation of the Company, the holders of Common Stock will
share equally in any balance of the Company's assets available for distribution
to them after satisfaction of creditors and the holders of the Company's senior
securities. The Company may pay dividends, in cash or in securities or other
property when and as declared by the Board of Directors from funds legally
available therefore, but has not declared or paid dividends on its Common Stock.
Preferred Stock
The Board of Directors has the authority to issue Preferred Stock and to fix and
determine its series, relative rights and preferences to the fullest extent
permitted by the laws of the State of Nevada and its articles of incorporation.
As of February 28, 1999, three classes of Preferred Stock were issued and
outstanding.
F-17
<PAGE> 45
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. CAPITAL STRUCTURE (CONTINUED)
Preferred Stock (Continued)
Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock
Series "A" Preferred Stock has rights which are superior to all other securities
of the Company, including upon liquidation and as to payment of dividends, if
any, carries a cumulative dividend of 13.5% per annum, is non-voting, and is
redeemable by the Company at any time at face value and is convertible into
common shares of the Company at the lesser of $10 per share or 85% of the last
five closing bid prices. A total of 17 shares are issued and outstanding as of
February 28, 1999 and November 30, 1999 (unaudited).
Series "AA" Non Voting, Cumulative, Convertible Preferred Stock
Series "AA" Preferred Stock has rights which are superior to all other
securities of the Company except to Series "A" Preferred Stock, including upon
liquidation and as to payment of dividends, if any, carries a cumulative
dividend which was set by the Board of Directors at 10% prior to the time of
issuance thereof, is non-voting, redeemable by the Company at any time at face
value and is convertible into common shares of the Company at 85% of the last
five closing bid prices. On June 14, 1999, all of the Series "AA" Non Voting,
Cumulative, Convertible Preferred Stock were converted into 1,337,509 shares of
common stock.
Series "AAA" 12% Cumulative, Convertible Preferred Shares
Series "AAA" Preferred Stock has rights which are superior to all other
securities of the Company except Series "A" and the Series "AA" Preferred Stock,
including upon liquidation and as to payment of dividends, if any. Series "AAA"
Cumulative, Convertible Preferred Voting Stock carries a 12% per annum dividend
payable in stock or cash, is voting, with each share equal to 100 shares of
common stock, and is redeemable, at the Company's option, according to the
following procedure: upon written notice of conversion from the holders, the
Company shall have 45 days from receipt of such notice to repurchase for cash up
to 2,000 shares of the Series AAA 12% Cumulative, Convertible Preferred Shares
at $1,000 per share.
As a result of the settlement of the litigation involving the Company and its
former Chairman, in which the Company was seeking to rescind the issuance of all
common shares in the Company previously issued to the former Chairman, the
number of common shares issuable to the holders pursuant to the conversion
provisions of the Series "AAA" Cumulative, Convertible Preferred Shares
F-18
<PAGE> 46
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. CAPITAL STRUCTURE (CONTINUED)
Preferred Stock (Continued)
are reduced from 8,000,000 shares to 4,500,000 shares (but after pro rata
adjustments, if any, for stock dividends, stock splits, reverse stock splits,
and any other similar capital stock adjustments of a general nature). There are
8,000 shares issued and outstanding at February 28, 1999 and November 30, 1999
(unaudited). The 12% cumulative dividend shall be computed based on the
preferred stock par value.
Aggregate preferred redemption value and cumulative dividends in arrears at
February 28, 1999 and November 30, 1999 are as follows:
<TABLE>
<CAPTION>
November 30, 1999 February 28, 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
Aggregate redemption value $ 5,729,706 $ 6,888,379
Cumulative preferred dividend $ 379,706 $ 238,378
Per share preferred dividend $ .03 $ .03
============ ============
</TABLE>
Stockholder's Receivable
Represents advances made to a stockholder and not reimbursed at the date of
these financial statements.
F-19
<PAGE> 47
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. CAPITAL STRUCTURE (CONTINUED)
Warrants
Outstanding warrants at February 28, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
FEBRUARY 28, 1999 February 28, 1998
------------------ ------------------
SHARES WAEP* Shares WAEP*
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding, beginning of year - - - -
Granted 100,000 $ 1.50 - -
Canceled-expired - - - -
Exercised - - - -
------- ------ ----- -----
Outstanding, end of year 100,000 $ 1.50 - -
======= ====== ===== =====
Exercisable, end of year 100,000 $ 1.50 - -
======= ====== ===== =====
</TABLE>
* Weighted average exercise price
8. INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended February 28,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Current:
State $ - $ -
Federal - -
--------- ---------
Deferred:
State (46,360) (77,136)
Federal (360,157) (303,107)
Valuation allowance 406,517 380,243
--------- ---------
$ - $ -
========= =========
</TABLE>
F-20
<PAGE> 48
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. INCOME TAXES (CONTINUED)
The reconciliation of the effective tax rates and U.S. statutory tax rates are
as follows:
<TABLE>
<CAPTION>
Years Ended February 28,
------------------------
1999 1998
-------- -------
<S> <C> <C>
Tax (benefit) at statutory rate (34%) (34%)
Tax benefit exclusion relating to Aquavision prior to
January 31, 1998 - 33%
Deferred tax effect of goodwill relating to Aquavision
acquisition - (46%)
Effect of state tax benefit (4%) -
Other 1% (3%)
Change in valuation allowance 37% 50%
----- -----
- -
===== =====
</TABLE>
Since Aquavision was a sole proprietorship prior to January 31, 1998, the tax
benefit relating to the period prior to January 31, 1998 was excluded from the
computation of the tax benefit, deferred taxes and NOL's carryforward.
At February 28, 1999, the Company has net operating loss (NOL) carryforwards,
for income tax reporting purposes, of approximately $1,126,919 and $563,144
available to offset future federal and California taxable income, respectively.
The federal carryforwards expire in 2009 and the California carryforwards expire
in 2004.
At February 1999, the Company had available tax credit carryforwards comprised
of federal and state research and experimentation credits of $4,187 and $2,303,
respectively. The research and experimentation credit carryforwards expire in
2019 for federal purposes and do not expire for California purposes.
F-21
<PAGE> 49
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. INCOME TAXES (CONTINUED)
The components of the net deferred tax asset and (liability) are as follows:
<TABLE>
<CAPTION>
Ended February 28,
-----------------------------------
1999 1998
<S> <C> <C>
Goodwill $ 342,748 $ 366,917
Net operating loss carryforward 427,591 8,628
Depreciation and amortization 5,623 -
Other 9,287 4,698
--------- ---------
Less: Valuation allowance (785,249) (380,243)
--------- ---------
$ - $ -
========= =========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space under an operating lease that expires in fiscal
year 2000. Total rent expense amounted to $75,237 and $70,796 for the years
ended June 30, 1999 and 1998.
Other Commitments and Contingencies
The Company's current management believes that the Company's and SWT's former
management entered into certain contracts, agreements and transactions which
were not properly authorized or consummated. At the date of these consolidated
financial statements, the Company is not aware of any formal claim relating to
these contracts, agreements or transactions and believe that any such claims
would be without merit. The Company cannot currently estimate the potential
liability that would arise if such claim were to be made. Accordingly, no
accrual has been made for these contingencies.
F-22
<PAGE> 50
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Legal Proceedings
No legal proceedings of a material nature to which the Company is a party are
pending at November 30, 1999, and the Company knows of no legal proceedings of a
material nature pending or threatened or judgments entered against any director
or officer of the Company in his capacity as such.
In July 1999, the Company settled a lawsuit which it had brought against its
former Chairman, Mr. DuSean Berkich, and certain of his affiliates. Under the
terms of the settlement, Mr. Berkich and his affiliates returned a total of
4,400,666 common shares for cancellation by the Company, and the Company
released Mr. Berkich and his affiliates from all future liability to the
Company.
Indemnification Agreement
The Company agreed to indemnify its agent with respect to a claim brought
against the agent and his firm with respect to services performed by the firm on
behalf of the Company. The Company was not named as a defendant and legal
counsel has advised the Company that, at the date of these consolidated
financial statements, it is not probable that there will be an unfavorable
outcome to the Company.
10. RELATED PARTY TRANSACTIONS
A board member's firm provided legal services for the Company during the 1999
fiscal year for which the firm was compensated $2,000 in cash payments and
100,000 shares of common stock granted after year end valued at $50,000. In
addition, the board member was granted 150,000 shares of common stock valued at
$75,000 after year end as consideration for services rendered as a member of the
board of directors.
Another board member's firm was engaged to advise the Company on capitalization
issues during the 1998 and 1999 fiscal years for which the firm was compensated
$54,478 and $150,451, respectively, as well as the issuance of 559,266 shares of
common stock valued at $559. Subsequent to year end, the board member was
granted 40,000 shares of common stock valued at $20,000 for services rendered as
a member of the board of directors.
F-23
<PAGE> 51
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. NET PROFIT (LOSS) PER SHARE
<TABLE>
<CAPTION>
For the Nine Months For the Years Ended
Ended November 30, February 28,
1999 1998 1999 1998
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
NUMERATOR:
Net profit (loss) $ 42,950 $ (885,370) $(1,072,937) $ (735,351)
Preferred stock dividends (141,268) (169,761) (230,503) (7,875)
---------- --------- ----------- ----------
Loss available to common
stockholders (98,318) (1,055,131) (1,303,440) (743,226)
========== =========== =========== ==========
DENOMINATOR:
Weighted average shares
outstanding 9,525,863 11,200,643 11,200,643 8,416,686
---------- ----------- ----------- ----------
Basic profit (loss) per share $ (.01) $ (.09) $ (0.12) $ (0.09)
========== =========== =========== ==========
</TABLE>
Options to purchase common stock and convertible preferred stock, were
outstanding during the 1999 and 2000 fiscal years (see Note 7) but were excluded
in the computation of the diluted loss per share because their inclusion would
have an anti-dilutive effect.
Also excluded from the computation of diluted loss per share because of their
anti-dilutive effect was preferred stock convertible to approximately 6,888,380
and 857,900 shares of common stock at February 28, 1999 and 1998, respectively.
The fiscal 1999 loss per share includes the operations of Aquavision, a sole
proprietorship, the Company's predecessor (see Note 1).
Subsequent to year end, approximately 4,400,000 shares of common stock were
canceled. The effect of this cancellation on loss per share would increase the
loss per share by $0.07 and $0.10 per share for the years ended February 28,
1999 and 1998, respectively.
Subsequent to year end, the Series AA preferred stock was converted into common
stock (see Note 7).
F-24
<PAGE> 52
PART III
<TABLE>
<CAPTION>
ITEM 1. INDEX TO EXHIBITS.
Exhibit
Number Description
- ------ -----------
<S> <C>
2A Plan of Exchange between Seychelle Environmental Technologies,
Inc. and Seychelle Water Technologies, Inc.
3A Articles of Incorporation
3B Articles of Merger of Royal Net, Inc. into Seychelle
Environmental Technologies, Inc.
3C Amendment to Articles of Incorporation re: Series "A"
Preferred Stock
3D Amendment to Articles of Incorporation re: Series "AA"
Preferred Stock
3E Amendment to Articles of Incorporation re: Series "AAA"
Preferred Stock
3F Bylaws
10A Purchase Agreement with Aqua Vision
10B Amended Purchase Agreement with Aqua Vision
</TABLE>
<PAGE> 53
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
Dated: 2/7/00 By: /s/ Carl Palmer
------ -------------------------------
Carl Palmer
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
CHIEF FINANCIAL OFFICER
Dated: 2/7/00 By: /s/ Carl Palmer
------ --------------------------------
Carl Palmer
Treasurer and Director
Dated: 2/7/00 By: /s/ Paul H. Lusby
------ --------------------------------
Paul H. Lusby
Secretary and Director
Dated: 2/7/00 By: /s/ Donald S. Whitlock
------ --------------------------------
Donald S. Whitlock
Director
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2A Plan of Exchange between Seychelle Environmental Technologies,
Inc. and Seychelle Water Technologies, Inc. dated January 30,
1998.
3A Articles of Incorporation dated January 23, 1998.
3B Articles of Merger of Royal Net, Inc. into Seychelle
Environmental Technologies, Inc.
3C Amendment to Articles of Incorporation re: Series "A"
Preferred Stock as of January 31, 1998.
3D Amendment to Articles of Incorporation re: Series "AA"
Preferred Stock as of June 5, 1998.
3E Amendment to Articles of Incorporation re: Series "AAA"
Preferred Stock as of February 18, 1999.
3F Bylaws
10A Purchase Agreement with Aqua Vision
10B Amended Purchase Agreement with Aqua Vision
</TABLE>
<PAGE> 1
2A
Plan of Exchange between Seychelle Environmental Technologies, Inc.
and Seychelle Water Technologies, Inc.
<PAGE> 2
AGREEMENT AND PLAN OF EXCHANGE
between
ROYAL NET, INC. an Utah corporation
and
SEYCHELLE WATER TECHNOLOGIES, INC., an Nevada corporation;
January 30th, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Recitals ........................................................................................................1
Agreement .......................................................................................................1
1. Plan of Exchange ..............................................................................1
2. Issuance of Shares ............................................................................2
3. Exemption ......................................................................................3
4. Representations and Covenants of Acquiree .....................................................3
5. Representations and Covenants of Acquiring Corporation ........................................4
6. Delivery Date .................................................................................6
7. Conditions Precedent to the Obligations of
Acquiree ....................................................................................6
8. Conditions Precedent to the Obligations of Acquiror ...........................................8
9. Indemnification ...............................................................................8
10. Nature and Survival of Representations ........................................................9
11. Documents at Closing ..........................................................................9
12. Miscellaneous ................................................................................10
Signature Page ...............................................................................11
</TABLE>
-ii-
<PAGE> 4
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange (hereinafter known as the
"Agreement") is entered into this 30th day of January, 1998, by and between
ROYAL NET, INC., an Utah corporation, (hereinafter known as "Acquiror") and
SEYCHELLE WATER TECHNOLOGIES, INC., an Nevada corporation (hereinafter known as
"Acquiree").
RECITALS
Acquiror desires to enter into a transaction whereby Acquiree will
exchange all of its issued and outstanding capital shares with Acquiror, with
Acquiror becoming the parent company. It is the intention of the parties hereto
that this transaction comply with the tax-free exchange provisions of Section
368 (a)(1)(B) of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, for the mutual consideration set out herein, the
parties agree as follows:
AGREEMENT
1. Plan of Exchange.
(a) It is the intention of the parties hereto that Acquiree
will exchange all of its issued and outstanding capital shares
with Acquiror, with Acquiror becoming the parent company.
Acquiror shall issue shares of Acquiror in common stock to the
Stockholders of Acquiree solely in exchange for their shares
in Acquiree. It is the intention of the parties hereto that
this transaction comply with the tax-free exchange provisions
of Section 368 (a)(1)(B) of the Internal Revenue Code of 1986,
as amended. Prior to the consummation of this exchange, the
Acquiror will have changed its domicile to the State of Nevada
and its name of Seychelle Environmental Technologies, Inc., or
such derivation thereof as may be approved by the appropriate
state authorities. This change of domicile shall be effected
by a statutory merger with Seychelle Environmental
Technologies, Inc., a Nevada corporation.
(b) Subject to the terms and conditions in this Agreement,
Acquiror and Acquiree will promptly, upon the satisfaction of
the conditions and obligations set forth herein, proceed with
the Exchange and file on the Delivery Date (which is defined
in Paragraph 6 herein) Articles of Exchange with the Secretary
of State for the State of Nevada meeting the requirements of
the Nevada Private Corporations Act and will take all other
action necessary and appropriate to consummate the Exchange
pursuant to this Agreement. The parties hereto agree that the
said Exchange shall be submitted to the Stockholders of
Acquiree and Acquiror for their approval, and the appropriate
officers and directors of Acquiree and Acquiror agree to use
their best efforts to secure approval of the Exchange.
(c) As a result of the Exchange and without any action on the
part of the holder thereof, all Acquiree shares of Common
Stock issued and outstanding at the Delivery Date shall be
exchanged, and each holder of a certificate representing any
such Acquiree shares of Common Stock shall thereafter cease to
have any rights with respect to such Acquiree, except the
right to receive, without interest, such number of fully paid
and nonassessable shares of Acquiror Common Stock as is
provided in this Agreement upon the surrender of such
certificate.
1
<PAGE> 5
The Acquiree stock options outstanding on the Delivery Date,
if any, shall not expire on the Delivery Date but shall be
exercisable in accordance with their respective terms to
acquire shares of Acquiror Common Stock, except that the
number of shares and the exercise prices thereof shall be
adjusted to correspond to the capital structure of the
Acquiree, whether before or after the Delivery Date. After the
Delivery Date, Acquiror shall assume the obligation of
Acquiree to issue Acquiror Common Stock pursuant to such stock
options.
Notwithstanding the foregoing, any exchange agent or any party
hereto shall be not liable to a holder of shares of Common
Stock of Acquiree for any shares of Acquiror's Common Stock or
dividends or any other distributions thereon delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
The persons who are Directors of Acquiror immediately prior to
the Delivery Date shall, from and after the Delivery Date,
resign and be replaced by the Directors of Acquiree until
their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal
in accordance with the Acquiror's Articles of Incorporation
and Bylaws.
The persons who are Officers of Acquiror immediately prior to
the Delivery Date shall, from and after the Delivery Date,
resign and be replaced by the Officers of Acquiror until their
successor have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in
accordance with the Acquiror's Articles of Incorporation and
Bylaws.
(d) On the Delivery Date (which is defined as the date in
Paragraph 6 herein), Stockholders of Acquiree will deliver
certificates for their shares of Acquiree Common Stock to
Acquiror or an agent appointed by Acquiror and, upon the
surrender of said certificates, Stockholders of Acquiree shall
be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Common Stock of
Acquiror into which those shares of Acquiree have been
converted as provided in this Agreement. All fractional shares
shall be rounded up to the next whole number. A list of the
shares of Acquiree, the owners thereof, and shares of Acquiror
Common Stock to be received by said Stockholders of Acquiree
shall be tendered to Acquiror as of the Delivery Date. The
delivery of the shares will be made to the Stockholders of
Acquiree as of the record date as set by Acquiree and will be
without restrictive legend on each certificate, except as
required by applicable statute, regulation, or contract. This
Exchange is being made in accordance with Rule 504 of the
Securities Act of 1933, as amended. (the "Securities Act").
2. Issuance of Shares. The parties agree that a total of
approximately 12,500,000 shares of Acquiror Common Stock(to be
issued from the new Nevada corporation) will be issued on the
basis of one new share for each share currently outstanding to
the Stockholders of record of Acquiree as certified by
Acquiree on the Delivery Date (as defined in Paragraph 6
herein).
3. Exemption. Acquiror agrees to file with the
Securities and Exchange Commission (the "SEC") a Form D and
such other form as may be appropriate under then applicable
SEC rules and regulations under the Securities Act and
appropriate state laws pertaining to the
2
<PAGE> 6
shares of Common Stock of Acquiror to be issued to those
persons who are Stockholders of Acquiree on the Delivery Date.
4. Representations and Covenants of Acquiree. Acquiree
specifically hereby represents and covenants that, effective
the Delivery Date, the following will be true and correct to
the best of its knowledge, information, and belief.
(a) The Stockholders as of the record date for the
special Stockholder meeting as set by Acquiree will
be the sole owners of all of the issued and
outstanding shares of Common Stock of Acquiree, and
such shares are free from claims, liens, or other
encumbrances.
(b) The issued shares of Acquiree Common Stock constitute
validly issued shares of Acquiree, and such shares
will be fully-paid and nonassessable.
(c) The unaudited financial statements of Acquiree which
have been delivered to Acquiror, will be complete,
accurate and will fairly present the financial
condition of Acquiree as of the dates thereof and the
results of its operations for the periods covered.
There will be no debts, liabilities, or obligations,
either accrued, absolute, fixed or contingent, not
reflected or reserved in such financial statements
other than contracts or obligations in the ordinary
and usual course of business; and no such contracts
or obligations in the usual course of business will
constitute liens or other liabilities which, if
disclosed, would alter substantially the financial
condition of Acquiree as reflected in such financial
statements.
(d) There will not be any negative material changes in
the financial position of Acquiree, except changes
arising in the ordinary course of business, which
changes will in no event adversely affect the
financial position of Acquiree.
(e) Except as set forth in Exhibit A hereto and except as
previously disclosed in the financial statements
provided under Paragraph 4(c) herein, to the best of
Acquiree's knowledge, information and belief, it will
not be involved in, and will not have received
judicial notice of any pending litigation or
governmental investigation or proceeding not
reflected in such financial statements, or otherwise
disclosed in writing to Acquiror and, to the best
knowledge of Acquiree, no material litigation,
claims, assessments, or governmental investigation or
proceeding is threatened against Acquiree or its
properties.
(f) Acquiree will be in good standing in its jurisdiction
of incorporation, and will be in good standing and
qualified to do business in each jurisdiction where
required to be so qualified.
(g) Acquiree will have complied with all applicable laws
in connection with its formation, issuance of
securities, organization, capitalization and
operations, and to the best of Acquiree's knowledge,
information and belief, no contingent liabilities
will have been threatened or claims made, and no
basis for the same exists with respect to said
operations, formation or capitalization, including
claims for violation of any US state or federal
securities laws.
3
<PAGE> 7
(h) Acquiree will have filed all governmental, tax or
related returns and reports due or required to be
filed and will have paid all taxes or assessments
which have or which shall become due.
(i) Except as disclosed in this Agreement or on any
Exhibit, Acquiree will not have breached any material
agreement to which it may be a party.
(j) The Acquiree has no subsidiary corporations.
(k) The corporate financial records, minute books, and
other documents and records of Acquiree will be
available to present management of Acquiror prior to
the Delivery Date and turned over to new management
of Acquiror in their entirety on the Delivery Date.
(l) The execution of this Agreement will not violate or
breach any agreement, contract, or commitment to
which Acquiree is a party and will have been duly
authorized by all appropriate and necessary action.
(m) The authorized capitalization of Acquiree will be as
set forth in the most recent unaudited balance sheet
of Acquiree as described in Paragraph 4(c), except as
may be specifically supplemented in writing by
Acquiree. All outstanding shares will have been duly
authorized, validly issued and will be fully paid and
nonassessable with no personal liability attaching to
the ownership thereof. Except as set forth in Exhibit
B hereto, there will be no outstanding convertible
securities, warrants, options or commitments of any
nature which may cause authorized but unissued shares
to be issued to any person except as shown in the
most recent financial statement of Acquiree.
(n) To the best knowledge of Acquiree, Acquiree will not
be subject to any material labor disputes or
disagreements, either actual or contingent.
(o) To the best knowledge of Acquiree, Acquiree's
products, materials and brochures will not infringe
the patent or copyright rights of any other person or
entity.
(p) As of the Delivery Date, the management of Acquiree
will have, to the best of management's knowledge,
disclosed all events, conditions and facts materially
affecting the business and prospects of Acquiree and
its assets. Acquiree will not have, at the Delivery
Date, withheld knowledge of any such events,
conditions, and facts which Acquiree knows, or has
reasonable grounds to know, may materially affect the
business and prospects of Acquiree or its assets.
5. Representations and Covenants of Acquiring
Corporation. Acquiror specifically hereby represents and
covenants that, effective the Delivery Date, the following
will be true and correct to the best of its knowledge,
information, and belief.
(a) As of the Delivery Date, the Acquiror shares of
Common Stock to be delivered to the Stockholders of
Acquiree will constitute valid and legally issued
shares of Acquiror as reflected as a result of the
change of Acquiror's state of domicile, fully-paid
and
4
<PAGE> 8
nonassessable, and will be legally equivalent in all
respects to the Common Stock of Acquiror issued and
outstanding as of the date thereof.
(b) The officers of Acquiror will have been duly
authorized to execute this Agreement and will have
taken all actions required by law and agreements,
charters, and bylaws, to properly and legally execute
this Agreement.
(c) The audited year-end financial statements of Acquiror
which includes the periods ending February 28, 1997,
December 31, 1996 and December 31, 1995, which have
been delivered to Acquiree, are complete, accurate
and fairly present the financial condition of
Acquiror as of the dates thereof and the results of
its operations for the periods covered. There are no
liabilities, either fixed or contingent, not
reflected in such financial statements other than
contracts or obligations in the ordinary and usual
course of business; and no such contracts or
obligations in the usual course of business
constitute liens or other liabilities which, if
disclosed, would alter substantially the financial
condition of such Acquiror as reflected in such
financial statements. These financial statements have
been prepared in accordance with US Generally
Accepted Accounting Principles consistently applied.
Prior to and as of the Delivery Date, there will not
be any material changes in the financial position of
Acquiror, except changes arising in the ordinary
course of business, which changes will in no event
adversely affect the financial condition of the
Acquiror.
(d) Acquiror will not be involved in any pending
litigation, claims, or governmental investigation or
proceeding and there will be no lawsuits, claims,
assessments, investigations, or similar matters, to
the best knowledge of management, threatened or
contemplated against Acquiror, its management or
properties.
(e) As of the Delivery Date, Acquiror will be duly
organized, validly existing and in good standing
under the laws of the state of incorporation; it will
have the corporate power to own its property and to
carry on its business as now being conducted and will
be duly qualified to do business in any jurisdiction
where so required.
(f) Acquiror will have filed all federal, state, county
and local income, excise, property and other tax
returns, forms, or reports, which are due or required
to be filed by it prior to the Delivery Date and will
have paid or made adequate provision for the payment
of all taxes, fees, or assessments which have or may
become due pursuant to such returns or pursuant to
any assessments received.
(g) Except as previously disclosed, Acquiror will not
have breached, nor will there be any pending or
threatened claims or any legal basis for a claim that
Acquiror has breached, any of the terms or conditions
of any agreements, contracts or commitments to which
it is a party or is bound and the execution and
performance hereof will not violate any provisions of
applicable law of any agreement to which Acquiror is
subject.
(h) The present capitalization of Acquiror will be
comprised of authorized Common Stock of 50,000,000
shares, $0.001 par value, of which no more than
300,000 shares will be issued and outstanding at the
Delivery Date and authorized preferred stock
5
<PAGE> 9
of 1,000,000 shares, with a $0.01 par value, to have
such classes and preferences as the Acquiror may
determine from time to time. No preferred shares will
be issued and outstanding. All outstanding shares
will have been duly authorized, validly issued, and
fully paid. There will not be outstanding or
presently authorized securities, warrants, options or
related commitments of any nature.
(i) Acquiror has no subsidiary corporations.
(j) The shares of Common Stock of Acquiror to be issued
to Acquiree's Stockholders as of the Delivery Date,
will be validly issued, nonassessable and fully-paid
under Nevada corporation law and will be registered
pursuant to a Rule 504 offering as applicable under
federal and state securities laws.
(k) Acquiror will have, disclosed all events, conditions
and facts materially affecting the business and
prospects of Acquiror. Acquiror will not have
withheld disclosure of any such events, conditions,
and facts which it, through management, has knowledge
of, or has reasonable grounds to know, may materially
affect the business and prospects of Acquiror.
6. Delivery Date. The Delivery Date shall be the date
that a closing is held at such place as the parties may
mutually agree, which date is expected to be January 30th,
1998, or such date as may mutually be agreed to after the date
that the transaction contemplated hereby has been approved by
the Stockholders of the Acquiree and Acquiror. Certain
exhibits, etc. may be delivered subsequent to the Delivery
Date upon the mutual agreement of the parties hereto. The
Stockholders will be deemed to have accepted, as of the
Delivery Date, delivery of the certificates of stock to be
issued in their respective names.
7. Conditions Precedent to the Obligations of Acquiree.
All obligations of Acquiree under this Agreement are subject
to the fulfillment, prior to, as of this date or at the
Delivery Date, of each of the following conditions:
(a) The representations and covenants by or on behalf of
Acquiror contained in this Agreement or in any
certificate or document delivered to Acquiree
pursuant to the provisions hereof shall be true in
all material respects at and as of the Delivery Date
as though such representations and warranties were
made at and as of such time.
(b) Acquiror shall have performed and complied with all
covenants, agreements, and conditions required by
this Agreement to be performed or complied with by it
prior to or at the Delivery Date, subject only to the
conditions required on the Delivery Date.
(c) A comfort letter shall be delivered to the Acquiree
from the Acquiror's accountant, Andersen, Andersen &
Strong, LLC. The comfort letter shall delivered by
said independent public accountants shall be in form
and substance satisfactory to the Acquiree and shall
be to the effect that:
(1) they are public accountants, independent with
respect to Acquiror, within the meaning of the
Securities Act and applicable published rules and
regulations thereunder;
6
<PAGE> 10
(2) the financial statements of the Acquiror audited
by them comply as to form in all material respects
with the applicable accounting requirements of the
Securities Act and the related published rules and
regulations; and
(3) they have carried out procedures to a specified
date not more than 10 business days prior to the
Delivery Date on, which constitutes an examination in
accordance with generally accepted auditing
standards, of the financial statements of the
Acquiror audited by them as follows: (i) read the
unaudited interim financial statements of Acquiror;
(ii) read the unaudited interim financial statements
of Acquiror for the period from the date of the most
recent financial statements through the date of the
latest available interim financial statements; (iii)
read the minutes of the meetings of stockholders and
boards of directors of such Acquiror to a date not
more than 10 business days prior to the Delivery
Date, and (iv) made inquiries of certain officers and
employees of such Acquiror responsible for financial
and accounting matters and, based on such procedures,
nothing has come to their attention which would cause
them to believe that: (A) any unaudited financial
statements of such Acquiror do not comply as to form
in all material respects with the applicable
accounting requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended, and the
published rules and regulations issued by the SEC
thereunder; (B) said financial statements are
presented in conformity with GAAP applied on a basis
substantially consistent with that of the audited
financial statements; and (C) for the period from the
date of the most recent financial statements, either
audited or unaudited to the Delivery Date, there was
no material change (as defined under the applicable
securities laws) in the financial statements of the
Acquiror.
(d) Acquiree shall have received an opinion from the
counsel to Acquiror, dated the Delivery Date, in form
and substance satisfactory to counsel for the
Acquiree, to the effect that:
(1) The Acquiror is a corporation duly organized,
validly existing and in good standing under the laws
of the state of its incorporation and has full
corporate power and authority to carry on its
business as it now is being conducted and to own and
operate its assets and properties;
(2) The outstanding shares of capital stock of the
Acquiror are fully paid and are duly and validly
issued and non-assessable and have not been issued in
violation of any preemptive right of Acquiror's
shareholders;
(3) Assuming that all existing directors have been
duly elected, all legal and corporate proceedings
necessary to be taken by and on the part of the
Acquiror in connection with the transactions
contemplated by this Agreement and necessary to make
the same effective have been duly and validly taken,
this Agreement has been duly and validly authorized,
executed and delivered by the Acquiror and
constitutes the valid and binding agreement of the
Seller, Acquiror as limited by applicable bankruptcy,
insolvency, reorganization or similar laws at the
time in effect;
7
<PAGE> 11
(4) Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated hereby is an event which, of itself or
with the giving of notice or the passage of time or
both, could: (i) constitute a violation of or
conflict with or result in any breach of the Articles
of Incorporation or Bylaws of the Acquiror or, to the
knowledge of such counsel, any material agreement or
instrument to which the Acquiror or any of its
subsidiaries is a Acquiror or by which any of them is
bound or any judgment, decree, or order to which any
of them is subject; or (ii) to the knowledge of such
counsel result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever
on the property or assets of the Acquiror or any of
its subsidiaries, and no such event of itself or with
the giving of notice or the passage of time or both
will result in the acceleration of the due date of
any obligation of the Acquiror; and
(5) To the knowledge of such counsel, there is no
action or proceeding pending or threatened against
the Acquiror or any of its properties or assets
before any court or governmental department, agency
or commission to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or
the consummation of the transactions contemplated
hereby.
(e) There shall be no more than 300,000 common shares of
Acquiror issued and outstanding, after giving effect
to a one-for-five reverse split of the Acquiror's
common stock and a cancellation of approximately
1,412,892 common shares.
(f) The Directors and Stockholders of Acquiror shall have
approved this transaction and such other reasonable
matters as requested by Acquiree as pertaining to
this transaction.
8. Conditions Precedent to the Obligations of Acquiror.
All obligations of the Acquiror under this Agreement are
subject to the fulfillment, prior to, as of this date or at
the Delivery Date, of each of the following conditions:
(a) The representations and covenants by Acquiree
contained in this Agreement or in any certificate or
document delivered to Acquiror pursuant to the
provisions hereof shall be true at and as of the
Delivery Date as though such representations and
warranties were made at and as of such time.
(b) Acquiree shall have performed and complied with all
covenants, agreements, and conditions required by
this Agreement to be performed or complied with by it
prior to or at the Delivery Date, including obtaining
approval of the Exchange by the Stockholders of
Acquiree, subject only to the conditions on the
Delivery Date.
9. Indemnification. Within the period provided in
paragraph 10 herein and in accordance with the terms of that
paragraph, each party to this Agreement, shall indemnify and
hold harmless each other party at all times after the date of
this Agreement against and in respect of any liability, damage
or deficiency, all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses including
attorney's fees incident to any of the foregoing, resulting
from any misrepresentations, breach of covenant or warranty or
non-fulfillment of any agreement on the part of such party
under this Agreement or from any
8
<PAGE> 12
misrepresentation in or omission from any certificate
furnished or to be furnished to a party hereunder. Subject to
the terms of this Agreement, the defaulting party shall
reimburse the other party on demand, for any reasonable
payment made by said party at any time after the Closing, in
respect of any liability or claim to which the foregoing
indemnity relates, if such payment is made after reasonable
notice to the other party to defend or satisfy the same and
such party failed to defend or satisfy the same.
10. Nature and Survival of Representations. All
representations, warranties and covenants made by either party
in this Agreement shall survive the Closing hereunder and the
consummation of the transactions contemplated hereby for two
years from the date hereof. Each of the parties hereto is
executing and carrying out the provisions of this Agreement in
reliance solely on the representations, warranties and
covenants and agreements contained in this Agreement and not
upon any investigation upon which it might have made or any
representations, warranty, agreement, promise or information,
written or oral, made by the other party or any other person
other than as specifically set forth herein.
11. Documents at Closing. At the Delivery Date, the
following transactions shall occur, all of such transactions
being deemed to occur simultaneously:
(a) Acquiree will deliver, or cause to be delivered, to
Acquiror the following:
(1) all corporate records of Acquiree, including
without limitation corporate minute books (which
shall contain copies of the Articles of Incorporation
and Bylaws, as amended to the Delivery Date), stock
books, stock transfer books, corporate seals, and
such other corporate books and records as may
reasonably requested for review by Acquiror and its
counsel;
(2) a certificate of the President of Acquiree to the
effect that all representations and warranties of
Acquiree made under this Agreement are reaffirmed on
the Delivery Date, the same as though originally
given on said date;
(3) certified copies of resolutions by Acquiree's
Board of Directors and Stockholders authorizing this
transaction;
(4) such other instruments, documents and
certificates, if any, as are required to be delivered
pursuant to the provisions of this Agreement or which
may be reasonably requested in furtherance of the
provisions of this Agreement;
(b) Acquiror will deliver or cause to be delivered to
Acquiree:
(1) stock certificates for Common Stock to be issued
as a part of the exchange after the date of approval
of this transaction by the Stockholder of Acquiree;
(2) a certificate of the President of Acquiror to the
effect that all representations and warranties of
Acquiror made under this Agreement are reaffirmed on
the Delivery Date, the same as though originally
given on said date;
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<PAGE> 13
(3) certified copies of resolutions by Acquiror's
Board of Directors and Stockholders authorizing this
transaction;
(4) such other instruments and documents as are
required to be delivered pursuant to the provisions
of this Agreement.
12. Miscellaneous.
(a) Further Assurances. At any time, and from time to
time, after the Delivery Date, each party will
execute such additional instruments and take such
action as may be reasonably requested by the other
party to confirm or perfect title to any property
transferred hereunder or otherwise to carry out the
intent and purposes of this Agreement.
(b) Waiver. Any failure on the part of either party
hereto to comply with any of its obligations,
agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) Brokers. Neither party has employed any brokers or
finders with regard to this Agreement unless
otherwise described in writing to each party hereto.
(d) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to
have been given if delivered in person or sent by
prepaid first class registered or certified mail,
return receipt requested.
(e) Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation
of this Agreement.
(f) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which
together shall constitute one and the same
instrument.
(g) Governing Law. This Agreement was negotiated and is
being contracted for in the State of Nevada, and
shall be governed by the laws of the State of Nevada.
(h) Binding Effect. This Agreement shall be binding upon
the parties hereto and inure to the benefit of the
parties, their respective heirs, administrators,
executors, successors and assigns.
(i) Entire Agreement. This Agreement is the entire
agreement of the parties covering everything agreed
upon or understood in the transaction. There are no
oral promises, conditions, representations,
understandings, interpretations or terms of any kind
of condition or inducements to the execution hereof.
(j) Time. Time is of the essence.
(k) Severability. If any part of this Agreement is deemed
to be unenforceable the balance
10
<PAGE> 14
of the Agreement shall remain in full force and
effect.
(l) Default Costs. In the event either party hereto has
to resort to legal action to enforce any of the terms
hereof, such party shall be entitled to collect
attorneys fees and other costs from the party in
default.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
ROYAL NET, INC.
a Utah Corporation
By: Signed
--------------------------------
Authorized Officer
SEYCHELLE WATER TECHNOLOGIES, INC.
a Nevada Corporation
By: Signed
--------------------------------
Authorized Officer
11
<PAGE> 15
ROYAL NET, INC.
OFFICER'S CERTIFICATE
The undersigned, President of ROYAL NET, INC. ("Acquiror"), does hereby
certify that he is a duly elected, qualified and acting officer of Acquiror, a
Utah corporation, and as such is familiar with the business affairs of said
corporation, and is familiar with and has read that certain Agreement and Plan
of Exchange between Acquiror and SEYCHELLE WATER TECHNOLOGIES, INC., dated
January 30th, 1998 (the "Agreement").
The undersigned does hereby state that the representations and
covenants made by Acquiror contained in said Agreement, to the best of his
knowledge, are true and correct at and as of the Delivery Date. In addition, the
undersigned hereby states that to the best of his knowledge, Acquiror has
performed and complied with all covenants, agreements and conditions required by
the Agreement to be performed or complied with by Acquiror prior to the Delivery
Date.
IN WITNESS WHEREOF, the undersigned, has hereunto duly executed this
Certificate this 30th day of January, 1998.
ROYAL NET, INC.
By: Signed
---------------------------
President
<PAGE> 16
SEYCHELLE WATER TECHNOLOGIES, INC.
OFFICER'S CERTIFICATE
The undersigned, President of SEYCHELLE WATER TECHNOLOGIES, INC.
("Acquiree"), does hereby certify that he is a duly elected, qualified and
acting officer of Acquiree, a Nevada corporation, and as such is familiar with
the business affairs of said corporation, and is familiar with and has read that
certain Agreement and Plan of Exchange between ROYAL NET, INC. and Acquiree,
dated January 30th, 1998 (the "Agreement").
The undersigned does hereby state that the representations and
covenants made by Acquiree contained in said Agreement, to the best of his
knowledge, are true and correct at and as of the Delivery Date. In addition, the
undersigned hereby states that to the best of his knowledge, Acquiree has
performed and complied with all covenants, agreements and conditions required by
the Agreement to be performed or complied with by Acquiree prior to the Delivery
Date.
IN WITNESS WHEREOF, the undersigned, has hereunto duly executed this
Certificate this 30th day of January, 1998.
SEYCHELLE WATER TECHNOLOGIES, INC.
By: Signed
------------------------------------
President
<PAGE> 1
3A
Articles of Incorporation
<PAGE> 2
ARTICLES OF INCORPORATION
OF
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
Pursuant to the provisions of the Nevada Private Corporations Act (Ch.
78, NRS, as amended), the undersigned Corporation hereby adopts the following
Articles of Incorporation:
FIRST. The name of the Corporation is SEYCHELLE ENVIRONMENTAL
TECHNOLOGIES, INC.
SECOND. OFFICE: Its principal office in the State of Nevada is located
at Suite 3, 251 Jeanell Drive, Carson City, Nevada 89703. The name and address
of its resident agent is Corporate Advisory Services, Inc., Suite 3, 251 Jeanell
Drive, Carson City, Nevada 89703.
THIRD. PURPOSE: The nature of the business, or objects or purposes
proposed to be transacted, promoted or carried on are:
To engage in any lawful activity and to manufacture, purchase or
otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer
or otherwise dispose of, trade, deal in and deal with minerals, goods, wares and
merchandise and personal property of every class and description.
To hold, purchase and convey real and personal estate and mortgage or
lease any such real and personal estate with its franchises and to take the same
by devise or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage, or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade names, relating to,
or useful in connection with, works of art or any other business of this
Corporation.
<PAGE> 3
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge
or otherwise dispose of the shares of the capital stock of, or any bonds,
securities or evidences of the indebtedness created by any other corporation or
corporations of this state, or any other state or government, and while owner of
such stock, bonds, securities or evidences of indebtedness, to exercise all the
rights, powers and privileges of ownership, including the right to vote, if any.
To borrow money and contract debts when necessary for the transaction
of its business, or for the exercise of its corporate rights, privileges or
franchises, or for any other lawful purpose of its incorporation; to issue
bonds, promissory notes, bills of exchange, debentures, and other obligations
and evidences of indebtedness, payable at specified time or times, or payable
upon the happening of a specified event or events, whether secured by mortgage,
pledge, or otherwise, or unsecured, for money borrowed, or in payment for
property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its own capital stock,
and use therefor its capital, capital surplus, surplus, or other property or
funds; provided it shall not use its funds or property for the purchase of its
own shares of capital stock when such use would cause any impairment of its
capital; and provided further, that shares of its own capital stock belonging to
it shall not be voted upon, directly or indirectly, nor counted as outstanding,
for the purpose of computing any stockholders' quorum or vote.
To conduct business, have one or more offices, and hold, purchase,
mortgage and convey real and personal property in this state, and in any of the
several states, territories, possessions and dependencies of the United States,
the District of Columbia, and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of
the objects hereinbefore enumerated or necessary or incidental to the protection
and benefit of the corporation, and, in general, to carry on any lawful business
necessary or incidental to the attainment of the objects of the corporation,
whether or not such business is similar in nature to the objects hereinbefore
set forth.
<PAGE> 4
The objects and purposes specified in the foregoing clauses shall,
except where otherwise expressed, be in no way limited or restricted by
reference to or inference from the terms of any other clause in these articles
of incorporation but shall be regarded as independent objects and purposes.
FOURTH. CAPITAL STOCK: The amount of the total authorized capital stock
of the corporation is SIXTY THOUSAND DOLLARS ($60,000) consisting of Fifty
Million (50,000,000) shares of one class of common stock of the par value of One
Mill ($.001) each; and One Million (1,000,000) shares of preferred stock of the
par value of One Cent ($.01) each, to have such classes, series and preferences
as the Board of Directors may determine from time to time.
Any and all shares issued by the Corporation will be issued in
registered form, as may be directed by the Board of Directors from time to time,
and the fixed consideration for which has been paid and delivered shall be
deemed fully paid and not liable for any further call or assessment thereon, and
the holders of such stock shall not be liable for any further assessments.
There shall be no preemptive rights in connection with the acquisition
of any capital stock of the Corporation.
FIFTH. DIRECTORS: The governing board of this Corporation shall be
known as directors, and the number of directors may from time to time be
increased or decreased in such manner as shall be provided by the by-laws of
this Corporation, provided that the number of directors shall not be reduced to
less than one (1).
The name and post office address of the first board of directors, which
shall be one (1) in number, is as follows:
<TABLE>
<CAPTION>
NAME POST OFFICE ADDRESSES
---- ---------------------
<S> <C>
DuSean Berkich Penthouse Suite
8400 East Prentice Ave.
Englewood, Colorado 80111
</TABLE>
<PAGE> 5
SIXTH. INCORPORATORS: The name and post office address of the
incorporator signing the articles of incorporation is as follows:
<TABLE>
<S> <C>
David J. Wagner 8400 E. Prentice Ave.
Penthouse Suite
Englewood, Colorado 80111
</TABLE>
SEVENTH. TERM: The Corporation is to have perpetual existence.
EIGHTH. AUTHORIZATIONS: In furtherance and not in limitation of the
powers conferred by statute, the board of directors is expressly authorized:
Subject to the by-laws, to make, alter or amend the by-laws of the
Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and liens
upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole board, to designate one
(1) or more committees, each committee to consist of one (1) or more of the
directors of the Corporation, which, to the extent provided in the resolution or
in the by-laws of the Corporation, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the by-laws of the Corporation or as may be
determined from time to time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a stockholders' meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the board of directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and
<PAGE> 6
assets of the Corporation, including its good will and its corporate franchises,
upon such terms and conditions as its board of directors deems expedient, and
for the best interest of the Corporation.
NINTH. MEETINGS: Meetings of stockholders may be held outside the State
of Nevada, if the by-laws provide. The books of the Corporation may be kept
(subject to any provision contained in the statues) outside the State of Nevada
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the Corporation.
TENTH. AMENDMENTS: This Corporation reserves the right to amend, alter,
change or repeal any provision contained in the articles of incorporation by
majority vote of the shareholders and in the manner now or hereafter prescribed
by statute, or by the articles of incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH. VOTING: There shall be no cumulative voting permitted in any
shareholder election of the Corporation.
TWELFTH. INDEMNIFICATION: The Corporation shall indemnify and hold
harmless the officers and directors of the Corporation from any and all
liabilities or claims to the fullest extent now, or hereafter from time to time,
permitted pursuant to the General Corporation Law of the State of Nevada.
<PAGE> 7
I, THE UNDERSIGNED, being the incorporator hereinbefore named for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 21st day of January, 1998.
Signed
---------------
DAVID J. WAGNER
STATE OF COLORADO )
) SS:
COUNTY OF ARAPAHOE )
On this 21st day of January, 1998, before me, a Notary Public,
personally appeared DAVID J. WAGNER, who acknowledged that he executed the above
instrument.
Signed
-------------
NOTARY PUBLIC
My Commission Expires:
<PAGE> 1
3B
Articles of Merger of Royal Net, Inc. into Seychelle
Environmental Technologies, Inc.
<PAGE> 2
ARTICLES OF MERGER
OF
ROYAL NET, INC., a Utah Corporation
INTO
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC., a Nevada Corporation
THESE ARTICLES OF MERGER (the "Articles") are made this 30th day of
January, 1998, by and between ROYAL NET, INC., a Utah corporation (hereinafter
referred to as the "Non- surviving Corporation") and SEYCHELLE ENVIRONMENTAL
TECHNOLOGIES, INC. a Nevada corporation (hereinafter the "Surviving
Corporation"), pursuant to the respective portions of Chapter 92A of the Nevada
Private Corporations Act.
I. The Non-surviving Corporation shall merge with the Surviving Corporation
and upon the effective date of such merger, as hereinafter specified, the
Non-surviving Corporation shall cease to exist and shall no longer exercise its
powers, privileges and franchises subject to the laws of the State of Utah, its
state of incorporation. The Surviving Corporation shall succeed to the property
and assets of and exercise all the powers, privileges and franchises of the
Non-surviving Corporation and shall assume and be liable for all of the debts
and liabilities, if any, of the Non-surviving Corporation.
II. The merger shall become effective as of January 30, 1998.
III. Immediately prior to the effective date of the merger contemplated herein,
the Non-surviving Corporation had 8,567,985 shares of its common stock issued
and outstanding. Immediately prior to the date of the merger contemplated
herein, the Surviving Corporation had one share of its common stock issued and
outstanding.
IV. As a result of the merger, all outstanding and issued shares of the
Non-surviving Corporation's common stock shall be exchanged for the exact amount
of shares of the Surviving Corporation.
V. A copy of the Agreement and Plan of Merger is attached hereto as Exhibit A
and incorporated herein by reference as though its provisions were fully set
forth herein.
VI. The Plan of Merger was submitted to the shareholders of the Non-Surviving
Corporation and approved by a sufficient number of shareholders of the
Non-Surviving Corporation on January 30, 1998 by a total of 5,000,000 shares out
of a total of 8,567,985 shares entitled to vote thereon, with a total of -0-
shares voting against the proposal and -0- shares voting to abstain. The sole
shareholder of the Surviving Corporation unanimously approved the Plan on
January 30, 1998.
The undersigned respective President and Secretary of the Non-surviving
Corporation and of the Surviving Corporation each hereby acknowledges that the
execution of these Articles of
<PAGE> 3
Merger is the act and deed of the Corporation on whose behalf he executes these
Articles and that the facts stated herein are true.
ROYAL NET, INC.
a Utah corporation
By: Signed By: Signed
------------------------------ ---------------------------
President Secretary
STATE OF UTAH )
) SS:
COUNTY OF Salt Lake )
On this 3rd day of February, 1998, before me, a Notary
Public, personally appeared Justine Blankenship and Dannette Uyeda who
acknowledged that they are the respective President and Secretary of Royal Net,
Inc., and that each has executed the above instrument
Signed
------------------------------
NOTARY PUBLIC
My Commission Expires: Stamp May 15, 2000
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
a Nevada corporation
By: Signed By: Signed
------------------------------ ---------------------------
President Secretary
STATE OF CA )
) SS:
COUNTY OF ORANGE )
On this 2nd day of February, 1998, before me, a Notary Public,
personally appeared DuSean Berkich who acknowledged that they are the respective
President and Secretary of Seychelle Environmental Technologies, Inc., and that
each has executed the above instrument
Signed
------------------------------
NOTARY PUBLIC
My Commission Expires:10-1-99
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
OF
ROYAL NET, INC., a Utah corporation
INTO
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC., a Nevada corporation
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 30th
day of January, 1998 by and between ROYAL NET, INC., a Utah corporation
(hereinafter referred to as the "Non-surviving Corporation") and SEYCHELLE
ENVIRONMENTAL TECHNOLOGIES, INC., a Nevada corporation (hereinafter referred to
as the "Surviving Corporation"). Hereinafter the Non-surviving Corporation and
Surviving Corporation shall be referred to as the "Corporations".
WHEREAS, the respective Corporations desire to merge;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
I. Pursuant to the Nevada Private Corporations Act, the Non-surviving
Corporation shall merge with the Surviving Corporation and upon the effective
date of such merger, the Non-surviving Corporation shall cease to exist and
shall no longer exercise its powers, privileges and franchises subject to the
laws of the State of Utah, its state of incorporation. The Surviving Corporation
shall succeed to the property and assets of and exercise all powers, privileges
and franchises of the Non- surviving Corporation and shall assume and be liable
for all of the debts and liabilities of the Non-surviving Corporation.
II. The Non-surviving Corporation's assets and liabilities shall otherwise
become the assets and liabilities of the Surviving Corporation.
<PAGE> 5
III. The officers of the Corporations are authorized and directed to take all
appropriate and necessary action to dissolve the Non-surviving Corporation under
applicable law.
IV. This Agreement and Plan of Merger shall become effective as of January
30, 1998.
V. The state of incorporation of the Surviving Corporation after the
effective date of the merger shall be the State of Nevada.
VI. The officers and directors of the Surviving Corporation after the
effective date of the merger shall be the same officers and directors as prior
to the effective date of the merger.
VII. The Surviving Corporation's name after the merger's effective date
shall remain the same.
VIII. The Articles of Incorporation of the Surviving Corporation shall serve as
the Articles of Incorporation for the Surviving Corporation and Non-surviving
Corporation as merged.
IX. The authorized capital shares of the Surviving Corporation, whether
issued or unissued on the effective date of the merger, shall remain the same
and not be converted into a different number or class of shares as a result of
the merger.
X. Immediately prior to the effective date of the merger contemplated
herein, the Non-surviving Corporation had 8,567,985 shares of its common stock
issued and outstanding. Immediately prior to the date of the merger contemplated
herein, the Surviving Corporation had one share of its common stock issued and
outstanding.
XI. As a result of the merger, all outstanding and issued shares of the
Non-surviving Corporation's common stock shall be exchanged for all of the
outstanding and issued shares of the Surviving Corporation. The Non-surviving
Corporation's shares will then be canceled.
XII. The Non-surviving and Surviving Corporation shall take, or cause to be
taken, all actions necessary, proper or advisable under the laws of the State of
Nevada to consummate and make effective the merger.
<PAGE> 6
XIII. It is intended that the transaction described herein qualifies as a
change of domicile within the definition of Section 368 of the Internal Revenue
Code of 1986, as amended.
The undersigned President and Secretary of each of the parties hereto
hereby acknowledge that the execution of this Agreement is the act and deed of
the Corporation on whose behalf each executes this Agreement, and that the facts
stated herein are true.
ROYAL NET, INC.
a Utah corporation
By: Signed By: Signed
----------------------------- ----------------------
President Secretary
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
a Nevada corporation
By: Signed By: Signed
----------------------------- ----------------------
President Secretary
<PAGE> 1
3C
Amendment to Articles of Incorporation re: Series "A" Preferred Stock
<PAGE> 2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
OF
Seychelle Environmental Technologies, Inc.
We the undersigned, Carl Palmer, President, and Paul Lusby, Secretary
of Seychelle Environmental Technologies, Inc. (The Corporation) do hereby
certify:
That the Board of Directors of the Corporation, by resolution dated
January 31, 1998, adopted a resolution to amend the original articles as
follows:
Article FOURTH is hereby amended to add the following at the end of the
first paragraph thereof:
The Corporation hereby establishes a new class of Two Hundred Fifty
(250) shares of the Corporation's $0.01 per share Preferred Stock, which shall
be designated Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred
Stock. Such Stock has rights which are superior to all other securities of the
Corporation as to the payment of dividends and upon liquidation, carries a 13.5%
cumulative dividend, payable quarterly if and when declared, is non-voting, and
is redeemable by the Corporation and convertible into common shares of the
Corporation upon terms and conditions to be established by the Corporation prior
to the issuance of the said Stock.
This Amendment was duly adopted by the Board of Directors of the
Corporation as permitted under the authority of Section 78.1955 of the Nevada
Revised Statutes, as amended and the Corporation's Articles of Amendment.
<PAGE> 3
Date January 31, 1998.
Seychelle Environmental Technologies, Inc.
By Signed
--------------------
President
and Signed
-------------------
Secretary
STATE OF California )
) SS:
COUNTY OF Orange )
On this 4th day of March, 1998, before me, a Notary Public, personally
appeared Carl Palmer, the President of Seychelle Environmental Technologies,
Inc., who acknowledged that he executed the above instrument.
Signed
--------------------
NOTARY PUBLIC
My Commission Expires: 6-21-99
STATE OF California )
) SS:
COUNTY OF Los Angeles )
On this 5th day of March, 1998, before me, a Notary Public, personally
appeared Paul Lusby, the Secretary of Seychelle Environmental Technologies,
Inc., who acknowledged that he executed the above instrument.
Signed
--------------------
NOTARY PUBLIC
My Commission Expires: April 28, 2000
<PAGE> 1
3D
Amendment to Articles of Incorporation re: Series "AA" Preferred Stock
<PAGE> 2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
OF
Seychelle Environmental Technologies, Inc.
We the undersigned, Carl Palmer, President, and Paul Lusby, Secretary
of Seychelle Environmental Technologies, Inc. (The Corporation) do hereby
certify:
That the Board of Directors of the Corporation, by resolution dated
June 5, 1998, adopted a resolution to amend the original articles as follows:
Article FOURTH is hereby amended to add the following at the end of the
first paragraph thereof:
The Corporation hereby establishes a new class of Three Hundred (300)
shares of the Corporation's $0.01 per share Preferred Stock, which shall be
designated Series "AA" Non Voting, Convertible Preferred Stock. Such Stock has
rights which are superior to all other securities of the Corporation except to
Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock, including
upon liquidation and as to payment of dividends, if any, carries a dividend as
set by the Board of Directors prior to the time of issuance thereof, is
non-voting, and is redeemable by the Corporation and convertible into common
shares of the Corporation upon terms and conditions to be established by the
Corporation prior to the issuance of the said Stock.
<PAGE> 3
This Amendment was duly adopted by the Board of Directors of the
Corporation as permitted under the authority of Section 78.1955 of the Nevada
Revised Statutes, as amended and the Corporation's Articles of Amendment.
Date June 5, 1998.
Seychelle Environmental Technologies, Inc.
By Signed
------------------------
President
and Signed
-----------------------
Secretary
STATE OF CA )
) SS:
COUNTY OF Orange )
On this 19th day of June, 1998, before me, a Notary Public, personally
appeared Carl Palmer, the President of Seychelle Environmental Technologies,
Inc., who acknowledged that he executed the above instrument.
Signed
---------------------
NOTARY PUBLIC
My Commission Expires: July 3rd, 2001
STATE OF California )
) SS:
COUNTY OF Los Angeles )
On this 19th day of June, 1998, before me, a Notary Public, personally
appeared Paul Lusby, the Secretary of Seychelle Environmental Technologies,
Inc., who acknowledged that he executed the above instrument.
Signed
---------------------
NOTARY PUBLIC
My Commission Expires: 4-28-2000
<PAGE> 1
3E
Amendment to Articles of Incorporation re: Series "AAA" Preferred Stock
<PAGE> 2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock under the authority of Section 78.1955 of the Nevada
Revised Statutes, as amended and the Corporation's Articles of Amendment.)
of
Seychelle Environmental Technologies, Inc.
We the undersigned, Carl Palmer, President, and Paul Lusby, Secretary
of Seychelle Environmental Technologies, Inc. (The Corporation) do hereby
certify:
That the Board of Directors of the Corporation, by resolution dated
February 18, 1999, adopted a resolution to amend the original articles as
follows:
Article FOURTH is hereby amended to add the following at the end of the
first paragraph thereof:
The Corporation hereby establishes a new class of Eight Thousand
(8,000) shares of the Corporation's $0.01 per share Preferred Stock, which shall
be designated Series "AAA" Cumulative Convertible Preferred Voting Stock. Such
Stock has rights which are superior to all other securities of the Corporation
except Series "A" 13.5% Non Voting, Cumulative, Convertible Preferred Stock and
the Series "AA" Non Voting, Convertible Preferred Stock, including upon
liquidation and as to payment of dividends, if any. Series "AAA" Cumulative
Convertible Preferred Voting Stock carries a dividend as set by the Board of
Directors prior to the time of issuance thereof, is voting, and is redeemable by
the Corporation and convertible into common shares of the Corporation upon terms
and conditions to be established by the Corporation prior to the issuance of the
said Stock.
The Board of Directors has the authority to amend its Articles of
Incorporation pursuant to Paragraph FOURTH thereof, which permits the Board of
Directors to issue preferred stock of the par value of One Cent ($.01) each, to
have such classes, series and preferences as the Board of Directors may
determine from time to time.
1.
<PAGE> 3
This Amendment was duly adopted by the Board of Directors of the
Corporation as permitted under the authority of Section 78.1955 of the Nevada
Revised Statutes, as amended and the Corporation's Articles of Amendment.
Date: March 1, 1999
Seychelle Environmental Technologies, Inc.
By: Signed
----------------------------------
Carl Palmer, President
By: Signed
----------------------------------
Paul H. Lusby, Secretary
STATE OF CALIFORNIA )
) ss.
COUNTY OF ORANGE )
On January 26, , before me, Stacey Hanes, Notary Public,
personally appeared Carl Palmer, (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signed
--------------------------------------
Notary Public
2.
<PAGE> 4
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On January 27, , before me, Consuelo M. Madrigal, Notary
Public, personally appeared Paul H. Lusby, (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signed
-----------------------------------------
Consuelo M. Madrigal, Notary Public
3.
<PAGE> 1
3F
Bylaws
<PAGE> 2
BYLAWS
OF
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
ARTICLE I
OFFICES
The principal office of the Corporation shall initially be located at
1920 Main Street, Suite 1020, Irvine, California and other offices at
such places within or without the State of Nevada and as the Board of
Directors may from time to time establish.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at 251
Jeanell Drive, Suite 3, Carson City, Nevada 89703, and the registered
agent shall be Corporate Advisory Service, Inc. The Board of Directors
may, by appropriate resolution from time to time, change the registered
office and/or agent.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the Stockholders for
the election of Directors and for the transaction of such other
business as may properly come before such meeting shall be held at such
time and date as the Board of Directors shall designate from time to
time by resolution duly adopted.
Section 2. Special Meetings. A special meeting of the Stockholders may
be called at any time by the President, the Chairman of the Board of
Directors, or the Board of Directors, and shall be called by the
President or the Chairman of the Board of Directors upon the written
request of Stockholders of record holding in the aggregate fifty-one
percent (51%) or more of the outstanding shares of stock of the
Corporation entitled to vote, such written request to state the purpose
or purposes of the meeting and to be delivered to the President or the
Chairman of the Board of Directors.
Section 3. Place of Meetings. All meetings of the Stockholders shall be
held at the principal office of the Corporation or at such other place,
within or without the State of Nevada, as shall be determined from time
to time by the Board of Directors or the
1
<PAGE> 3
Stockholders of the Corporation.
Section 4. Change in Time or Place of Meetings. The time and place
specified in this Article III for annual meetings shall not be changed
within thirty (30) days next before the day on which such meeting is to
be held. A notice of any such change shall be given to each Stockholder
at least twenty (20) days before the meeting, in person or by letter
mailed to his last known post office address.
Section 5. Notice of Meetings. Written notice, stating the place, day
and hour of the meeting, and in the case of a special meeting, the
purposes for which the meeting is called, shall be given by or under
the direction of either the President, the Chairman of the Board of
Directors, or Secretary at least ten (10) days but not more than fifty
(50) days before the date fixed for such meeting. Notice shall be given
to each Stockholder entitled to vote at such meeting, of record at the
close of business on the day fixed by the Board of Directors as a
record date for the determination of the Stockholders entitled to vote
at such meeting, or if no such date has been fixed, of record at the
close of business on the day next preceding the day on which notice is
given. Notice shall be in writing and shall be delivered to each
Stockholder in person or sent by United States Mail, postage prepaid,
addressed as set forth on the books of the Corporation. A waiver of
such notice, in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be
deemed equivalent to such notice. Except as otherwise required by
statute, notice of any adjourned meeting of the Stockholders shall not
be required.
Section 6. Quorum. Except as may otherwise be required by statute, the
presence at any meeting, in person or by proxy, of the holders of
record of one-third of the shares then issued and outstanding and
entitled to vote shall be necessary and sufficient to constitute a
quorum for the transaction of business. In the absence of a quorum, a
majority in interest of the Stockholders entitled to vote, present in
person or by proxy, or, if no Stockholder entitled to vote is present
in person or by proxy, any Officer entitled to preside or act as
secretary of such meeting, may adjourn the meeting from time to time
for a period not exceeding sixty (60) days in any one case. At any such
adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as
originally called. The Stockholders present at a duly organized meeting
may continue to do business until adjournment, notwithstanding the
withdrawal of enough Stockholders to leave less than a quorum.
Section 7. Voting. Except as may otherwise be provided by statute or
these Bylaws, including the provisions of Section 4 of Article VIII
hereof, each Stockholder shall at every meeting of the Stockholders be
entitled to one (1) vote, in person or by proxy, for each share of the
voting capital stock held by such Stockholder.
2
<PAGE> 4
However, no proxy shall be voted on after eleven (11) months from its
date, unless the proxy provides for a longer period. At all meetings of
the Stockholders, except as may otherwise be required by statute, the
Articles of Incorporation of this Corporation, or these Bylaws, if a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter
shall be the act of the Stockholders.
Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held, and persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of
the Corporation he shall have expressly empowered the pledgee to vote
thereon, in which case only the pledgee or his proxy may represent said
stock and vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation shall not be voted directly or indirectly.
Section 8. Consent of Stockholders in Lieu of Meeting. Whenever the
vote of Stockholders at a meeting thereof is required or permitted to
be taken in connection with any corporate action, by any provision of
statute, these Bylaws, or the Articles of Incorporation, the meeting
and vote of Stockholders may be dispensed with if all the Stockholders
who would have been entitled to vote upon the action if such meeting
were held shall consent in writing to such corporate action being
taken.
Section 9. Telephonic Meeting. Any meeting held under this Article III
may be held by telephone, in accordance with the provisions of the
Nevada Private Corporations Act.
Section 10. List of Stockholders Entitled to Vote. The Officer who has
charge of the stock ledger of the Corporation shall prepare and make,
at least ten (10) days before every annual meeting, a complete list of
the Stockholders entitled to vote at such meeting, arranged in
alphabetical order, and showing the address of each Stockholder and the
number of shares registered in the name of each Stockholder. Such list
shall be open to the examination of any Stockholder during ordinary
business hours, for a period of at least ten (10) days prior to
election, either at a place within the city, town or village where the
election is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where said meeting
is to be held. The list shall be produced and kept at the time and
place of election during the whole time thereof and be subject to the
inspection of any Stockholder who may be present.
3
<PAGE> 5
ARTICLE IV
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by the Board of Directors, except as otherwise
provided by statute, the Articles of Incorporation of the Corporation,
or these Bylaws.
Section 2. Number and Qualifications. The Board of Directors shall
consist of at least one (1) member, and not more than nine (9) members,
as shall be designated by the Board of Directors from time to time, and
in the absence of such designation, the Board of Directors shall
consist of one (1) member. This number may be changed from time to time
by resolution of the Board of Directors. Directors need not be
residents of the State of Nevada or Stockholders of the Corporation.
Directors shall be natural persons of the age of eighteen (18) years or
older.
Section 3. Election and Term of Office. Members of the initial Board of
Directors of the Corporation shall hold office until the first annual
meeting of Stockholders. At the first annual meeting of Stockholders,
and at each annual meeting thereafter, the Stockholders shall elect
Directors to hold office until the next succeeding annual meeting. Each
Director shall hold office until his successor is duly elected and
qualified, unless sooner displaced. Election of Directors need not be
by ballot.
Section 4. Compensation. The Board of Directors may provide by
resolution that the Corporation shall allow a fixed sum and
reimbursement of expenses for attendance at meetings of the Board of
Directors and for other services rendered on behalf of the Corporation.
Any Director of the Corporation may also serve the Corporation in any
other capacity, and receive compensation therefor in any form, as the
same may be determined by the Board in accordance with these Bylaws.
Section 5. Removals and Resignations. Except as may otherwise be
provided by statute, the Stockholders may, at any special meeting
called for the purpose, by a vote of the holders of the majority of the
shares then entitled to vote at an election of Directors, remove any or
all Directors from office, with or without cause.
A Director may resign at any time by giving written notice to either
the Board of Directors, the President, the Chairman of the Board of
Directors, or the Secretary of the Corporation. The resignation shall
take effect immediately upon the receipt of the notice, or at any later
period of time specified therein. The acceptance of such resignation
shall not be necessary to make it effective, unless the resignation
requires acceptance for it to be effective.
Section 6. Vacancies. Any vacancy occurring in the office of a
Director, whether by reason of an increase in the number of
directorships or otherwise, may be filled
4
<PAGE> 6
by a majority of the Directors then in office, though less than a
quorum. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, unless sooner displaced.
When one or more Directors resign from the Board, effective at a future
date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations
shall become effective. Each Director so chosen shall hold office as
herein provided in the filling of other vacancies.
Section 7. Committees. By resolution adopted by a majority of the Board
of Directors, the Board may designate one or more committees, including
an Executive Committee, each consisting of one (1) or more Directors.
The Board of Directors may designate one (1) or more Directors as
alternate members of any such committee, who may replace any absent or
disqualified member at any meeting of such committee. Any such
committee, to the extent provided in the resolution and except as may
otherwise be provided by statute, shall have and may exercise the
powers of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require the same. The
designation of such committee and the delegation thereto of authority
shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed upon it or him by law. If there
be more than two (2) members on such committee, a majority of any such
committee may determine its action and may fix the time and place of
its meetings, unless provided otherwise by the Board. If there be only
two (2) members, unanimity of action shall be required. Committee
action may be by way of a written consent signed by all committee
members. The Board shall have the power at any time to fill vacancies
on committees, to discharge or abolish any such committee, and to
change the size of any such committee.
Except as otherwise prescribed by the Board of Directors, each
committee may adopt such rules and regulations governing its
proceedings, quorum, and manner of acting as it shall deem proper and
desirable.
Each such committee shall keep a written record of its acts and
proceedings and shall submit such record to the Board of Directors.
Failure to submit such record, or failure of the Board to approve any
action indicated therein will not, however, invalidate such action to
the extent it has been carried out by the Corporation prior to the time
the record of such action was, or should have been, submitted to the
Board of Directors as herein provided.
5
<PAGE> 7
ARTICLE V
MEETINGS OF BOARD OF DIRECTORS
Section 1. Annual Meetings. The Board of Directors shall meet each year
immediately after the annual meeting of the Stockholders for the
purpose of organization, election of Officers, and consideration of any
other business that may properly be brought before the meeting. No
notice of any kind to either old or new members of the Board of
Directors for such annual meeting shall be necessary.
Section 2. Regular Meetings. The Board of Directors from time to time
may provide by resolution for the holding of regular meetings and fix
the time and place of such meetings. Regular meetings may be held
within or without the State of Nevada. The Board need not give notice
of regular meetings provided that the Board promptly sends notice of
any change in the time or place of such meetings to each Director not
present at the meeting at which such change was made.
Section 3. Special Meetings. The Board may hold special meetings of the
Board of Directors at any place, either within or without the State of
Nevada, at any time when called by the President, the Chairman of the
Board of Directors, or two or more Directors. Notice of the time and
place thereof shall be given to and received by each Director at least
three (3) days before the meeting. A waiver of such notice in writing,
signed by the person or persons entitled to said notice, either before
or after the time stated therein, shall be deemed equivalent to such
notice. Notice of any adjourned special meeting of the Board of
Directors need not given.
Section 4. Quorum. The presence, at any meeting, of a majority of the
total number of Directors shall be necessary and sufficient to
constitute a quorum for the transaction of business. Except as
otherwise required by statute, the act of a majority of the Directors
present at a meeting at which a quorum is present shall be the act of
the Board of Directors; however, if only two (2) Directors are present,
unanimity of action shall be required. In the absence of a quorum, a
majority of the Directors present at the time and place of any meeting
may adjourn such meeting from time to time until a quorum is present.
Section 5. Consent of Directors in Lieu of Meeting. Unless otherwise
restricted by statute, the Board may take any action required or
permitted to be taken at any meeting of the Board of Directors without
a meeting, if a written consent thereto is signed by all members of the
Board, and such written consent is filed with the minutes of
proceedings of the Board.
Section 6. Telephonic Meeting. Any meeting held under this Article V
may be held by telephone, in accordance with the provisions of the
Nevada Private Corporations Act.
6
<PAGE> 8
Section 7. Attendance Constitutes Waiver. Attendance of a Director at a
meeting constitutes a waiver of any notice to which the Director may
otherwise have been entitled, except where a Director attends a meeting
for the express purpose of objecting the transaction of any business
because the meeting is not lawfully called or convened.
ARTICLE VI
OFFICERS
Section 1. Number. The Corporation shall have a Chairman of the Board,
a President, one or more Vice Presidents as the Board may from time to
time elect, a Secretary and a Treasurer, and such other Officers and
Agents as may be deemed necessary. One person may hold any two offices.
Section 2. Election, Term of Office, and Qualifications. The Board
shall choose the Officers specifically designated in Section 1 of this
Article VI at the annual meeting of the Board of Directors and such
Officers shall hold office until their successors are chosen and
qualified, unless sooner displaced. Officers need not be Directors of
the Corporation.
Section 3. Subordinate Officers. The Board of Directors, from time to
time, may appoint other Officers and Agents, including one or more
Assistant Secretaries and one or more Assistant Treasurers, each of
whom shall hold office for such period, and each of whom shall have
such authority and perform such duties as are provided in these Bylaws
or as the Board of Directors from time to time may determine. The Board
of Directors may delegate to any Officer or the Chairman of the Board
of Directors the power to appoint any such subordinate Officers and
Agents and to prescribe their respective authorities and duties.
Section 4. Removals and Resignations. The Board of Directors may, by
vote of a majority of their entire number, remove from office any
Officer or Agent of the Corporation, appointed by the Board of
Directors.
Any Officer may resign at any time by giving written notice to the
Board of Directors. The resignation shall take effect immediately upon
the receipt of the notice, or any later period of time specified
therein. The acceptance of such resignation shall not be necessary to
make it effective, unless the resignation requires acceptance for it to
be effective.
Section 5. Vacancies. Whenever any vacancy shall occur in any office by
death, resignation, removal, or otherwise, it shall be filled for the
unexpired portion of the term in the manner prescribed by these Bylaws
for the regular election or
7
<PAGE> 9
appointment to such office, at any meeting of Directors.
Section 6. The Chairman of the Board. The Chairman of the Board shall
be the Chief Executive Officer of the Corporation and, subject to the
direction and under the supervision of the Board of Directors, shall
have general charge of all of the affairs of the Corporation. The
Chairman shall preside at all meetings of the Stockholders and of the
Board of Directors at which he is present.
Section 7. The President. The President shall be the chief operating
officer of the Corporation and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
day-to-day operations and of the property of the Corporation, and shall
have control over its Officers, Agents and Employees. The President
shall preside at all meetings of the Stockholders and of the Board of
Directors at which the Chairman is not present. The President shall do
and perform such other duties and may exercise such other powers as
these Bylaws or the Board of Directors from time to time may assign to
him.
Section 8. The Vice President. At the request of the President or in
the event of his absence or disability, the Vice President, or in case
there shall be more than one Vice President, the Vice President
designated by the President, or in the absence of such designation, the
Vice President designated by the Board of Directors, shall perform all
the duties of the President, and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the President.
Any Vice President shall perform such other duties and may exercise
such her powers as from time to time these Bylaws or by the Board of
Directors or the President be assign to him.
Section 9. The Secretary. The Secretary shall:
a. record all the proceedings of the meetings of the
Corporation and Directors in a book to be kept for
that purpose;
b. have charge of the stock ledger (which may, however,
be kept by any transfer agent or agents of the
Corporation under the direction of the Secretary), an
original or duplicate of which shall be kept at the
principal office or place of business of the
Corporation;
c. see that all notices are duly and properly given;
d. be custodian of the records of the Corporation and
the Board of Directors, and the and of the seal of
the Corporation, and see that the seal is affixed to
all stock certificates prior to their issuance and to
all documents for which the Corporation has
authorized execution on its behalf under its seal;
8
<PAGE> 10
e. see that all books, reports, statements,
certificates, and other documents and records
required by law to be kept or filed are properly kept
or filed;
f. in general, perform all duties and have all powers
incident to the office of Secretary, and perform such
other duties and have such other powers as these
Bylaws, the Board of Directors, the Chairman of the
Board of Directors, or the President from time to
time may assign to him; and
g. prepare and make, at least ten (10) days before every
election of Directors, a complete list of the
Stockholders entitled to vote at said election,
arranged in alphabetical order.
Section 10. The Treasurer. The Treasurer shall:
a. have supervision over the funds, securities, receipts
and disbursements of the Corporation;
b. cause all moneys and other valuable effects of the
Corporation to be deposited in its name and to its
credit, in such depositories as the Board of
Directors or, pursuant to authority conferred by the
Board of Directors, its designee shall select;
c. cause the funds of the Corporation to be disbursed by
checks or drafts upon the authorized depositories of
the Corporation, when such disbursements shall have
been duly authorized;
d. cause proper vouchers for all moneys disbursed to be
taken and preserved;
e. cause correct books of accounts of all its business
and transactions to be kept at the principal office
of the Corporation;
f. render an account of the financial condition of the
Corporation and of his transactions as Treasurer to
the President, the Chairman of the Board of
Directors, or the Board of Directors, whenever
requested;
g. be empowered to require from the Officers or Agents
of the Corporation reports or statements giving such
information as he may desire with respect to any and
all financial transactions of the Corporation; and
9
<PAGE> 11
h. in general, perform all duties and have all powers
incident to the office of Treasurer and perform such
other duties and have such other powers as from time
to time may be assigned to him by these Bylaws or by
the Chairman of the Board of Directors, the Board of
Directors or the President.
Section 11. Salaries. The Board of Directors shall from time to time
fix the salaries of the Officers of the Corporation. The Board of
Directors may delegate to any person the power to fix the salaries or
other compensation of any Officers or Agents appointed, in accordance
with the provisions of Section 3 of this Article VI. No Officer shall
be prevented from receiving such salary by reason of the fact that he
is also a Director of the Corporation. Nothing contained in this Bylaw
shall be construed so as to obligate the Corporation to pay any Officer
a salary, which is within the sole discretion of the Board of
Directors.
Section 12. Surety Bond. The Board of Directors may in its discretion
secure the fidelity of any or all of the Officers of the Corporation by
bond or otherwise.
ARTICLE VII
EXECUTION OF INSTRUMENTS
Section 1. Checks, Drafts, Etc. The President or the Chairman of the
Board of Directors and the Secretary or Treasurer shall sign all
checks, drafts, notes, bonds, bills of exchange, and orders for the
payment of money of the Corporation, and all assignments or
endorsements of stock certificates, registered bonds, or other
securities, owned by the Corporation, unless otherwise directed by the
Board of Directors, or unless otherwise required by law.. The Board of
Directors or the Chairman of the Board of Directors may, however,
authorize any Officer or the Chairman of the Board to sign any of such
instruments for and on behalf of the Corporation without necessity of
countersignature, and may designate Officers, or Employees of the
Corporation other than those named above who may, in the name of the
Corporation, sign such instruments.
Section 2. Execution of Instruments Generally. Subject always to the
specific direction of the Board of Directors, the President or the
Chairman of the Board of Directors shall execute all deeds and
instruments of indebtedness made by the Corporation and all other
written contracts and agreements to which the Corporation shall be a
party, in its name, attested by the Secretary. The Secretary, when
necessary required, shall affix the corporate seal thereto.
10
<PAGE> 12
Section 3. Proxies. The President, the Chairman of the Board and the
Secretary or an Assistant Secretary of the Corporation or by any other
person or persons duly authorized by the Board of Directors may execute
and deliver proxies to vote with respect to shares of stock of other
corporations owned by or standing in the name of the Corporation from
time to time on behalf of the Corporation.
ARTICLE VIII
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed in the name
of the Corporation by either the Chairman of the Board of Directors or
the President and by the Secretary of the Corporation, certifying the
number of shares owned by that person in the Corporation.
Certificates of stock shall be in such form as shall, in conformity to
law, be prescribed from time to time by the Board of Directors.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall
only be transferred on the books of the Corporation by the holder of
record thereof or by his attorney duly authorized in writing, upon
surrender to the Corporation of the certificates for such shares
endorsed by the appropriate person or persons, with such evidence of
the authenticity of such endorsement, transfer, authorization and other
matters as the Corporation may reasonably require. Surrendered
certificates shall be canceled and shall be attached to their proper
stubs in the stock certificate book.
Section 3. Rights of Corporation with Respect to Registered Owners.
Prior to the surrender to the Corporation of the certificates for
shares of stock with a request to record the transfer of such shares,
the Corporation may treat the registered owner as the person entitled
to receive dividends, to vote, to receive notifications, and otherwise
to exercise all the rights and powers of an owner.
Section 4. Closing Stock Transfer Book. The Board of Directors may
close the Stock Transfer Book of the Corporation for a period not
exceeding fifty (50) days preceding the date of any meeting of
Stockholders, the date for payment of any dividend, the date for the
allotment of rights, the date when any change, conversion or exchange
of capital stock shall go into effect, or for a period of not exceeding
fifty (50) days in connection with obtaining the consent of
Stockholders for any purpose.
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<PAGE> 13
However, in lieu of closing the Stock Transfer Book, the Board of
Directors may in advance fix a date, not exceeding fifty (50) days
preceding the date of any meeting of Stockholders, the date for the
payment of any dividend, the date for the allotment of rights, the date
when any change or conversion or exchange of capital stock shall go
into effect, or a date in connection with obtaining such consent, as a
record date for the determination of the Stockholders entitled to
notice of, and to vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend, or to any
such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such
consent. In such case such Stockholders of record on the date so fixed,
and only such Stockholders shall be entitled to such notice of, and to
vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.
Section 5. Lost, Destroyed and Stolen Certificates. The Corporation may
issue a new certificate of shares of stock in the place of any
certificate theretofore issued and alleged to have been lost, destroyed
or stolen. However, the Board of Directors may require the owner of
such lost, destroyed or stolen certificate or his legal representative,
to: (a) request a new certificate before the Corporation has notice
that the shares have been acquired by a bona fide purchaser; (b)
furnish an affidavit as to such loss, theft or destruction; (c) file
with the Corporation a sufficient indemnity bond; or (d) satisfy such
other reasonable requirements, including evidence of such loss,
destruction, or theft as may be imposed by the Corporation.
ARTICLE IX
DIVIDENDS
Section 1. Sources of Dividends. The Directors of the Corporation,
subject to the Nevada Revised Statutes, as amended, may declare and pay
dividends upon the shares of the capital stock of the Corporation.
Section 2. Reserves. Before the payment of any dividend, the Directors
of the Corporation may set apart out of any of the funds of the
Corporation available for dividends a reserve or reserves for any
proper purpose, and the Directors may abolish any such reserve in the
manner in which it was created.
Section 3. Reliance on Corporate Records. A Director in relying in good
faith upon the books of account of the Corporation or statements
prepared by any of its officials as to the value and amount of the
assets, liabilities, and net profits of the
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<PAGE> 14
Corporation, or any other facts pertinent to the existence and amount
of surplus or other funds from which dividends might properly be
declared and paid shall be fully protected.
Section 4. Manner of Payment. Dividends may be paid in cash, in
property, or in shares of the capital stock of the Corporation.
ARTICLE X
SEAL AND FISCAL YEAR
Section 1. Seal. The corporate seal, subject to alteration by the Board
of Directors, shall be in the form of a circle, shall bear the name of
the Corporation, and shall indicate its formation under the laws of the
State of Nevada and the year of incorporation. Such seal may be used by
causing it or a facsimile thereof to be impressed, affixed, or
otherwise reproduced.
Section 2. Fiscal Year. The Board of Directors shall, in its sole
discretion, designate a fiscal year for the Corporation.
ARTICLE XI
AMENDMENTS
Except as may otherwise be provided herein, a majority vote of the
whole Board of Directors at any meeting of the Board, is required to
amend or repeal any provision of these Bylaws.
ARTICLE XII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. Exculpation. No Director or Officer of the Corporation shall
be liable for the acts, defaults, or omissions of any other Director or
Officer, or for any loss sustained by the Corporation, unless the same
has resulted from his own willful misconduct, willful neglect, or gross
negligence.
Section 2. Indemnification. Each Director and Officer of the
Corporation and each person who shall serve at the Corporation's
request as a director or officer of another corporation in which the
Corporation owns shares of capital stock or of which it is a creditor
shall be indemnified by the Corporation to the fullest extent permitted
from time to time by the Nevada Revised Statutes against all reasonable
costs, expenses and liabilities (including reasonable attorneys' fees)
actually and necessarily incurred by or imposed upon him in connection
with, or resulting from any claim, action, suit, proceeding,
investigation, or inquiry of whatever nature in
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<PAGE> 15
which he may be involved as a party or otherwise by reason of his being
or having been a Director or Officer of the Corporation or such
director or officer of such other corporation, whether or not he
continues to be a Director or Officer of the Corporation or a director
or officer of such other corporation, at the time of the incurring or
imposition of such costs, expenses or liabilities, except in relation
to matters as to which he shall be finally adjudged in such action,
suit, proceeding, investigation, or inquiry to be liable for willful
misconduct, willful neglect, or gross negligence toward or on behalf of
the Corporation in the performance of his duties as such Director or
Officer of the Corporation or as such director or officer of such other
corporation. As to whether or not a Director or Officer was liable by
reason of willful misconduct, willful neglect, or gross negligence
toward or on behalf of the Corporation in the performance of his duties
as such Director or Officer of the Corporation or as such director or
officer of such other corporation, in the absence of such final
adjudication of the existence of such liability, the Board of Directors
and each Director and Officer may conclusively rely upon an opinion of
independent legal counsel selected by or in the manner designated by
the Board of Directors. The foregoing right to indemnification shall be
in addition to and not in limitation of all other rights which such
person may be entitled as a matter of law, and shall inure to his legal
representatives' benefit.
Section 3. Liability Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation or who is or was serving
at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust,
association, or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his
status as such, whether or not he is indemnified against such liability
by this Article XII.
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<PAGE> 1
10A
Purchase Agreement with Aqua Vision
<PAGE> 2
PURCHASE AGREEMENT
between
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
("Purchaser")
and
The TAM Irrevocable Trust and Select Property Investments, LLC
(Collectively "Sellers")
JANUARY 31, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. PURCHASE AND SALE OF ASSETS ........................................................... 1
1.1 Purchase and Sale of Assets .................................................. 1
1.2 Assumption of Certain Liabilities ............................................ 3
1.3 Other Liabilities Not Assumed ................................................ 3
1.4 Assignment of Certain Contracts .............................................. 4
1.5 Instruments of Conveyance, Assumption, or Assignment ......................... 5
2. PURCHASE PRICE ........................................................................ 5
2.1 Purchase Price ............................................................... 5
3. CLOSING ............................................................................... 6
3.1 Closing ...................................................................... 6
4. TAXES AND PREPAID ITEMS ............................................................... 6
5. REPRESENTATIONS AND WARRANTIES OF SELLERS ............................................. 6
5.1 Organization and Authority ................................................... 6
5.2 Due Authorization; Effect of Transaction ..................................... 6
5.3 Financial Statements ......................................................... 7
5.4 Accounts Receivable .......................................................... 7
5.5 Liabilities .................................................................. 7
5.6 Distributions ................................................................ 8
5.7 Subsidiaries ................................................................. 8
5.8 Personal Properties .......................................................... 8
5.9 Material Contracts and Arrangements .......................................... 9
5.10 Ordinary Course of Business .................................................. 9
5.11 Litigation and Compliance with Laws ......................................... 11
5.12 Tax Returns .................................................................. 11
5.13 Environmental Matters ........................................................ 12
5.14 Trademarks, Trade Secrets, Licenses, Etc ..................................... 13
5.15 Insurance Policies ........................................................... 13
5.16 Extraordinary Events ......................................................... 13
5.17 Adverse Restrictions ......................................................... 14
5.18 Material Information ......................................................... 14
5.19 Products in Warranty ......................................................... 14
5.20 Certain Transactions ......................................................... 14
5.21 No Governmental Authorizations or Approvals Required ......................... 15
5.22 Continuing Representations ................................................... 15
6. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF PURCHASER .............................. 15
6.1 Due Authorization; Effect of Transaction ..................................... 15
6.2 Continuing Representations ................................................... 15
7. COVENANTS AND AGREEMENTS .............................................................. 16
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
7.1 Sellers' Covenants and Agreements Pending Final Delivery of All Documents .... 16
8. CONDITIONS OF PURCHASER'S OBLIGATIONS ................................................. 17
8.1 No Opposition ................................................................ 17
8.2 Permits, Etc ................................................................. 17
8.3 Insurance .................................................................... 18
8.4 Representations and Covenants ................................................ 18
8.5 Instruments of Transfer ...................................................... 18
8.6 Tax Waiver ................................................................... 18
8.7 Tax Allocation ............................................................... 18
8.8 Solvency Certificate ......................................................... 18
8.9 Diligence .................................................................... 18
9. CONDITIONS OF SELLERS' OBLIGATIONS .................................................... 19
9.1 Representations and Covenants ................................................ 19
9.2 No Opposition ................................................................ 19
10. INDEMNIFICATION BY SELLERS ............................................................ 19
10.1 Indemnification .............................................................. 19
10.2 Notice of Claim .............................................................. 21
10.3 Set-Off or Reimbursement ..................................................... 22
11. INDEMNIFICATION BY PURCHASER .......................................................... 22
11.1 Indemnification .............................................................. 22
11.2 Notice of Claim .............................................................. 23
12. BULK SALES ACT ........................................................................ 24
13. BROKERAGE FEE ......................................................................... 24
14. AMENDMENTS; WAIVERS ................................................................... 25
15. ASSIGNMENT; SUCCESSORS AND ASSIGNS .................................................... 25
16. SEVERABILITY .......................................................................... 25
17. COUNTERPARTS .......................................................................... 26
18. SECTION AND OTHER HEADINGS ............................................................ 26
19. NOTICES ............................................................................... 26
19. GENDER ................................................................................ 27
20. LAW TO GOVERN ......................................................................... 27
21. COURTS ................................................................................ 27
</TABLE>
<PAGE> 5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), entered into this 31st day
of January, 1998 by and between SEYCHELLE ENVIRONMENTAL TECHNOLOGIES,
INC, a Nevada corporation ("Purchaser"), and THE TAM IRREVOCABLE TRUST,
a California Trust and SELECT PROPERTY INVESTMENTS, LLC, a Nevada
Limited Liability Company (collectively, "Sellers");
W I T N E S S E T H T H A T:
WHEREAS, Purchaser desires to purchase and Sellers desire to sell and
convey to Purchaser all of the assets of AQUA VISION INTERNATIONAL, a
California sole proprietorship, upon the terms and subject to the
conditions set forth herein; and
WHEREAS, Purchaser is willing to assume certain specified liabilities
of Sellers;
NOW, THEREFORE, in consideration of the agreements of the parties
hereto, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Purchase and Sale of Assets. At the Closing (as defined in Section
3), Sellers agree to sell, convey, transfer, assign, and deliver to
Purchaser, and Purchaser agrees to purchase from Sellers, for the
purchase price hereinafter specified, all of the assets, properties,
and business of every kind and description and wherever situated used
by Sellers in the operation of AQUA VISION INTERNATIONAL, as more
specifically listed in the Schedule of Assets attached hereto (the
"Assets"). Without limiting the generality of the foregoing, the Assets
to be acquired by Purchaser hereunder shall include:
(a) All of Sellers' goodwill and business as a going concern
relating to the operation of AQUA VISION INTERNATIONAL, including the
name "AQUA VISION INTERNATIONAL", or any variation thereof.
(b) All of Sellers' accounts receivable relating to the operation
of AQUA VISION INTERNATIONAL (a recent listing of which is attached
hereto), including miscellaneous accounts receivable, and notes
receivable or other rights to receive payments, whether arising out of
the manufacture, sale, distribution, or use of AQUA VISION
INTERNATIONAL'S products, technology, services, or otherwise.
Page 1
<PAGE> 6
(c) All of Sellers' inventories of finished goods,
work-in-process, raw materials, and other miscellaneous supplies and
materials relating to the operation of AQUA VISION INTERNATIONAL (a
recent listing of which is attached hereto).
(d) All of Sellers' prepaid expenses relating to the operation of
AQUA VISION INTERNATIONAL (excluding those, if any, pertaining to
taxes, to pension or other benefits plans, or to insurance policies
that are listed on any Schedule as not to be acquired by Purchaser
pursuant to this Agreement).
(e) All machinery, equipment, tools, molds, motor vehicles,
transportation, packing and delivery equipment and supplies, furniture
and fixtures of every kind and description owned by Seller or ordered
by it and used in the operation of AQUA VISION INTERNATIONAL (a recent
listing of which is attached hereto) on or before the Closing Date (as
defined in Section 3).
(f) All of Sellers' right, title, and interest of every kind and
description in and to the following assets relating to the operation of
AQUA VISION INTERNATIONAL:
(i) All of Sellers' rights and privileges under "Assigned
Contracts" (as defined in Section 1.4) and unfilled purchase and
sales orders.
(ii) All of Sellers' rights to or under all trademarks,
service marks, certification marks, United States and foreign
trademark registrations and applications, trade names, copyrights,
United States and foreign patents and patent applications, if any,
relating to the operation of AQUA VISION INTERNATIONAL including
international priority rights associated therewith, and all patent
and other license, trade secrets, inventions, and royalties and
rights to sue for past infringements, including, without
limitation, those items listed or otherwise described on the
Schedules hereto.
(iii) All of Sellers' customer lists, uncollected invoices,
credit files, payroll records, schedules of fixed assets, books of
account, contracts, sales representation agreements, and sales
agency agreements (if any), files, papers, books, records,
designs, drawings, specifications and engineering data, and all
Page 2
<PAGE> 7
other public or confidential business records, in each case to the
extent related to the operation of AQUA VISION INTERNATIONAL, and
to the extent reasonably required for the orderly continuation of
the business operations of AQUA VISION INTERNATIONAL (excluding
the minute books, stock books or organizational documents,
including trust agreements, of Sellers, and any other business
records of Sellers unrelated to the operations of AQUA VISION
INTERNATIONAL)(collectively, the "Business Records").
(g) Except as otherwise specified on the Schedules hereto, all of
Sellers' causes of action, judgements, claims and demands of whatever
nature, memberships, agencies and permits, claims for refunds and
rights of offset and credits, to the extent related to the operation of
AQUA VISION INTERNATIONAL, and all to the extent that they are
assignable by Sellers.
1.2 Assumption of Certain Liabilities. Purchaser shall assume as of the
date of this Agreement those liabilities of Sellers specifically listed
on the Schedule of Assumed Liabilities hereto (the "Assumed
Liabilities"), and Purchaser shall not assume, incur, guarantee, or be
otherwise obligated with respect to any liability whatsoever of Sellers
other than as so stated. With respect to any Assumed Liability, such
assumption by Purchaser is for the benefit only of the Sellers and
shall not expand, increase, broaden, or enlarge the rights or remedies
of any other party, nor create in any other party any right against
Purchaser that such party would not have against Sellers if this
Agreement had not been consummated.
1.3 Other Liabilities Not Assumed. Purchaser shall not assume any
liabilities of Sellers that are not listed on the Schedule of Assumed
Liabilities, and, with respect to each Assumed Liability listed on the
Schedule of Assumed Liabilities, Purchaser does not assume and shall
not have or be under any liability or obligation over and above any
amount, or after the occurrence of any limitation or expiration date,
of such liability or obligation stated on such schedule. Without
limiting the generality of the foregoing and except as otherwise
provided on the Schedule of Assumed Liabilities, the Assumed
Liabilities will not include, and Purchaser shall not assume under this
Agreement, any of the following obligations or liabilities of Sellers:
(a) Any cost, expense, or tax liability of Sellers arising from or
growing out of the sale provided for by this Agreement.
Page 3
<PAGE> 8
(b) Any debt, obligation, or liability to any person or any entity
owned or controlled in whole or in part by Sellers under any sales,
representation, or similar agreement not identified as an Assigned
Contract (as defined below).
(c) Any debt, liability, or obligation of Sellers (or costs and
expenses in connection therewith) to the extent that such debt,
liability, or obligation is actually satisfied or paid on behalf of
Sellers by an insurer or insurers under a policy issued to such
Sellers.
(d) Any liability or obligation arising from any violation by
Sellers or by their employees or agents of any statute (or rule or
regulation thereunder) or executive regulation of the United States or
any State or any political subdivision or agency thereof or any
statutes (or rule or regulation thereunder) or executive,
administrative, or quasi-judicial regulation of any foreign government.
(e) Any liability or obligation whose existence violates or is
contrary to any representation or warranty of Sellers.
(f) Federal and other domestic or foreign income tax or other tax
liabilities known or unknown, existing, or arising from operations
prior to the Closing.
(g) Any liability or obligation for or arising under any claim for
workers' compensation or for any tort, breach of any legal duty, breach
or violation of any contract or violation or breach of any law,
statute, ordinance, rule, regulation, injunction, or decree, or any
liability or obligation for any "product liability" or other claim
connected in any manner with any products, events, or activities
produced or taking place prior to the Closing.
1.4 Assignment of Certain Contracts. At the Closing, Purchaser shall
succeed to the rights and privileges of Sellers, and shall assume the
express obligations of Sellers performable after the Closing pursuant
to those leases, insurance policies, contracts, and other agreements,
and only those leases, insurance policies, contracts, and other
agreements of Sellers that are listed as "Assigned Contracts" on the
Disclosure Schedule hereto ("Assigned Contracts") as and in the form of
the copies thereof (or, if oral, as and in the form of the written
statements of the terms thereof) furnished or made available to
Purchaser pursuant to Sections
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5.9, 5.11, 5.12, and 5.18 hereto. Without limiting the generality of
the foregoing, Purchaser shall not assume and shall have no liability
with respect to any obligations of Sellers under any Assigned Contract
(a) required therein to be performed by Sellers at or prior to the
Closing or (b) arising out of any breach thereof not included in the
copies (or written statements of the terms) of such Assigned Contracts
delivered or made available to Purchaser pursuant hereto.
1.5 Instruments of Conveyance, Assumption, or Assignment. The sale,
conveyance, transfer, assignment, and delivery of the Assets, the
Assigned Contracts and the assumption of the Assumed Liabilities, as
herein provided, shall be effected by bills of sale, endorsements,
assignments, deeds, drafts, checks, stock powers, or other instruments
in such reasonable and customary form as shall be requested by
Purchaser, and Sellers shall at any time and from time to time after
the Closing, upon reasonable request, execute, acknowledge, and deliver
such additional bills of sale, endorsements, assignments, deeds,
drafts, checks, stock powers, or other instruments and take such other
actions as may be reasonably required to effectuate the transactions
contemplated by this Agreement.
2. PURCHASE PRICE.
2.1 Purchase Price. In consideration for the sale, conveyance,
transfer, and delivery of the Assets and the Assigned Contracts and
upon the terms and subject to the conditions set forth in this
Agreement, Purchaser shall pay to Sellers the "Purchase Price", which
shall be a cash payment of Nine Million Five Hundred Thousand
Dollars($9,500,000), of which the sum of One Hundred Twenty-Five
Thousand Dollars ($125,000) has already been paid. A payment of Six
Million Eight Hundred Seventy-Five Thousand ($6,875,000) shall be paid
in cash or certified funds at the Closing specified in Section 3 below.
The remaining Two Million Five Hundred Thousand Dollars ($2,500,000)
shall be due and payable in cash or certified funds as follows: One
Million Dollars ($1,000,000) will be paid within sixty (60) days of the
Closing specified in Section 3 below. An additional Five Hundred
Thousand Dollars ($500,000) will be paid thereafter within each
succeeding sixty (60) day period until the Purchase Price has been paid
in full. The said payments under this paragraph shall be paid as
follows: The TAM Irrevocable Trust, a California trust (60%); and
Select Property Investments, LLC, a Nevada Limited Liability Company
(40%).
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3. CLOSING.
3.1 Closing. The closing of the sale and purchase (the "Closing")
shall take place at the offices of the Purchaser, as of January 31,
1998(the "Closing Date"). At or after the Closing, Sellers shall
deliver to Purchaser such bills of sale, endorsements, assignments,
deeds, drafts, checks, stock powers, or other instruments as shall be
effective to vest in Purchaser good and marketable title to the Assets
subject to no liens, encumbrances, or rights in any other party
whatsoever, except as are described in the Disclosure Schedule.
4. TAXES AND PREPAID ITEMS.
Except as otherwise provided herein, Sellers will pay all sales, use,
franchise, and other taxes and charges, including, without limitation,
ad valorem, or other taxes which may become payable in connection with
the sale of the Assets pursuant to the terms of this Agreement, and any
and all other taxes and charges accruing out of the operation of
Sellers' businesses prior to the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby represent and warrant, covenant and agree that:
5.1 Organization and Authority. Aqua Vision International is a sole
proprietorship duly organized, validly existing, and in good standing
under the laws of its jurisdiction of operation and is duly qualified
and in good standing in each other jurisdiction in which it owns or
leases properties, conducts operations, or maintains a stock of goods,
with full power and authority to carry on the business in which it is
engaged (a true and correct list of each such jurisdiction is set forth
in the Disclosure Schedule) and to execute and deliver and carry out
the transactions contemplated by this Agreement.
5.2 Due Authorization; Effect of Transaction. No provisions of any
agreement, instrument, or understanding, or any judgment, decree, rule,
or regulation, to which Aqua Vision International is a party or by
which it is bound, has been or will be violated by the execution and
delivery by Sellers of this Agreement or the performance or
satisfaction of any agreement or condition herein contained upon its
part to be performed or satisfied, and all requisite authorizations for
such execution, delivery, performance, and satisfaction have been duly
obtained. Upon execution and delivery, this
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Agreement will be a legal, valid, and binding obligation of Sellers,
enforceable in accordance with its terms.
5.3 Financial Statements. Except as set forth on the Disclosure
Schedule, Sellers have delivered to Purchaser the balance sheet of Aqua
Vision International as at the close of its fiscal year for the year
ending December 31, 1997, together with related consolidated statements
of operations, consolidated statements of changes in owner's equity,
and consolidated statements of cash flows for the year then ended. The
financial statements specified above, including in each case the notes
to such financial statements, are hereinafter sometimes collectively
referred to as the "Financial Statements." All of the Financial
Statements are true, correct, and complete, have been prepared in
accordance with generally accepted accounting principles consistently
followed throughout the periods (except as set forth in such notes or
statements) and fairly present the financial condition of Aqua Vision
International and the results of its operations as at the dates thereof
and throughout the periods covered thereby. The Financial Statements
reflect or provide for all claims against, and all debts and
liabilities of, Aqua Vision International, fixed or contingent, as at
the dates thereof, and there has not been any change between the date
of the most recent Financial Statements and the date of this Agreement
that has materially or adversely affected the business or properties or
condition or prospects, financial or other, or results of operations of
Aqua Vision International, and no fact or condition exists or is
contemplated or threatened, which might cause any such change at any
time in the future.
5.4 Accounts Receivable. Subject to the bad debt reserve shown in the
Financial Statements, all customer and trade notes and accounts
receivable owned by Aqua Vision International on the date of the most
recent balance sheet included in the Financial Statements are fully
collectible in the aggregate, to the extent of the aggregate face value
thereof as indicated on such balance sheet.
5.5 Liabilities. Aqua Vision International has no liabilities of any
nature, whether absolute, contingent, or otherwise, except as set forth
in the most recent balance sheet included in the Financial Statements,
other than liabilities subsequently incurred in the ordinary course of
business. Aqua Vision International is not in breach or default or in
arrears in respect of the terms or conditions of any such liabilities
and no waiver or forbearance has been granted by any holder of any such
liability with respect to
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any such liability. All liabilities of Aqua Vision International, other
than the Assumed Liabilities, will be paid in full on or before the
Closing Date.
5.6 Distributions. From the end of their most recent fiscal year to
the date hereof Sellers have not made any distribution whatsoever,
either in cash or other property with respect to Aqua Vision
International.
5.7 Subsidiaries. Aqua Vision International does not own, directly or
indirectly, any of the capital stock of any corporation, association,
trust or similar entity, any interest in the equity of any partnership
or similar entity, any share in any joint venture, or any other equity
or proprietary interest in any entity or enterprise, however organized
and however such interest may be denominated or evidenced.
5.8 Personal Properties. Sellers own and have good and marketable
title to all the tangible and intangible personal property and assets,
other than the leaseholds referred to in the Disclosure Schedule,
reflected upon the most recent balance sheet included in the Financial
Statements or used by Sellers in the business of AQUA VISION
INTERNATIONAL if not so reflected, free and clear of all mortgages,
liens, encumbrances, equities, claims, and obligations to other
persons, of whatever kind and character, except as set forth in the
Disclosure Schedule. The Disclosure Schedule contains an identification
of certain major items of fixed assets and machinery and equipment.
None of the fixed assets and machinery and equipment is subject to
contracts of sale, and none is held by Sellers as lessee or as
conditional sales vendee under any lease or conditional sales contract
and none is subject to any title retention agreement, except as set
forth in the Disclosure Schedule. The fixed assets and machinery and
equipment, taken as a whole, are in a state of good repair and
maintenance and are in good operating condition; inventory is up to
normal commercial standards and no inventory that is obsolete or
unmarketable is reflected in the most recent balance sheets included in
the Financial Statements. All items included in such inventory are
covered on the books of Aqua Vision International, and are valued on
the Financial Statements at the lower of cost or market and, in any
event, at not greater than their net realizable value, on an item by
item basis. Upon the sale, assignment, transfer, and delivery of the
Assets to Purchaser hereunder, there will be vested in Purchaser good
and marketable title to the tangible and intangible personal property
constituting a
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part thereof, free and clear of all mortgages, liens, encumbrances,
equities, claims, and obligations to other persons, of whatever kind
and character, except for the rights of third persons arising under
contracts for the sale of inventory in the ordinary course of business,
each of which is listed in the Disclosure Schedule.
5.9 Material Contracts and Arrangements. Except as set forth in the
Disclosure Schedule, Sellers have no contract or arrangement,
including, without limitation, any commitments or obligations,
contingent or otherwise, under any contract or arrangement (i) for the
purchase or sale of inventory in excess of $1,000 in any one instance,
(ii) for the purchase or sale of supplies, services or other items in
excess of $500 in any one instance, (iii) for the purchase, sale or
lease of any equipment or machinery, (iv) for the performance of
service for others in excess of $500 in any one instance, or (v)
extending beyond January 15, 1998. All contracts of less than $500 do
not in the aggregate exceed $5,000, Each of such contracts and
arrangements is valid, binding, subsisting, and enforceable in
accordance with its terms and Sellers have performed all obligations
required to be performed under any such contract or arrangement and are
not in breach or default or in arrears in any material respect or in
any other respect that would permit the other party to cancel such
contract or arrangement under the terms thereof. To the best knowledge
of Sellers after due inquiry, each of the contracts, if any, set forth
in the Disclosure Schedule calling for the performance of services or
the sale of inventory can be satisfied or performed by Sellers without
any loss to them.
5.10 Ordinary Course of Business. Sellers, from the date of the balance
sheet of Aqua Vision International contained in the most recent
Financial Statements to the date hereof,
(a) have operated the business of Aqua Vision International in the
normal, usual, and customary manner and in the ordinary and regular
course of business;
(b) have not sold or otherwise disposed of any of the properties
or assets of Aqua Vision International, other than inventory sold in
the ordinary course of business;
(c) except in each case in the ordinary course of business,
(i) have not amended or terminated any outstanding lease,
contract, or agreement,
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(ii) have not incurred any obligations or liabilities (fixed,
contingent, or other), and
(iii) have not entered any commitments;
(d) have not made any transactions outside the ordinary course of
business in the inventory of Aqua Vision International or any additions
to its property or any purchases of machinery or equipment, except for
normal maintenance and replacements;
(e) have not discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent) of Aqua
Vision International other than current liabilities or obligations
under contracts then existing or thereafter entered into in the
ordinary course of business, and commitments under leases existing on
that date or incurred since that date in the ordinary course of
business;
(f) have not mortgaged, pledged, or subjected to lien or any other
encumbrances, any of Aqua Vision International's assets, tangible or
intangible;
(g) have not sold or transferred any tangible asset or canceled
any debts or claims of Aqua Vision International except in each case in
the ordinary course of business;
(h) have not sold, assigned, or transferred any patents,
trademarks, trade names, trade secrets, copyrights, or other intangible
assets of Aqua Vision International;
(i) have not suffered any material damage, destruction, or loss
(whether or not covered by insurance) or any acquisition or taking of
property of Aqua Vision International by any governmental authority;
(j) have not waived any rights of Aqua Vision International that
individually or in the aggregate exceed $1,000;
(k) have not experienced any organized work stoppage or industrial
action of Aqua Vision International; or
(l) have not entered into any other transaction or transactions
that individually or in the aggregate are material to the business of
Aqua Vision International, other than in the ordinary course of
business.
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5.11 Litigation and Compliance with Laws. The Disclosure Schedule
contains a brief description of all litigation or legal or other
actions, suits, proceedings, or investigations, at law or in equity or
admiralty, or before any federal, state, municipal, or other
governmental department (including, without limitation, the National
Labor Relations Board), commission, board, agency, or instrumentality,
domestic or foreign, in which Sellers, as the owners of Aqua Vision
International, are engaged, or, to the knowledge and belief of Sellers,
with which Aqua Vision International is threatened in connection with
the business or affairs or properties or assets of Aqua Vision
International. Aqua Vision International is and at all times since its
inception has been in compliance with all laws and governmental rules
and regulations, domestic and foreign, and all requirements of
insurance carriers, applicable to its business or affairs or properties
or assets, including, without limitation, those relating to
environmental protection, water or air pollution, and similar matters.
5.12 Tax Returns. Sellers have filed, in accordance with applicable
law, all federal, state, county, and local income and franchise tax
returns and all real and personal property tax returns that are
required to be filed for Aqua Vision International, and the provision
for taxes shown on the most recent balance sheet included in the
Financial Statements is sufficient to satisfy all taxes of any kind of
Aqua Vision International, including interest and penalties in respect
thereof, whether disputed or not, and whether accrued, due, absolute,
deferred, contingent, or other for all periods ended on or prior to the
date of such balance sheet. As of the date hereof no tax liabilities
have been assessed or proposed that remain unpaid, and Sellers have not
caused Aqua Vision International to sign any extension agreement with
the Internal Revenue Service or any state or local taxing authority.
Sellers have paid all taxes regarding Aqua Vision International that
have become due pursuant to such returns and have paid all installments
of estimated taxes due. All taxes and other assessments and levies that
Sellers are required by law for the benefit of Aqua Vision
International to withhold or to collect have been duly withheld and
collected, and have been paid over to the proper governmental
authorities to the extent due and payable. From the end of its most
recent fiscal year to the date hereof Sellers have not made any payment
of or on account of any federal, state, or local income, franchise, or
any real or personal property taxes regarding Aqua Vision
International, except as set forth in the Disclosure Schedule. Sellers
are not aware of any
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basis upon which any assessment for a material amount of additional
federal income taxes could be made. The information shown on the
federal income tax returns of Aqua Vision International heretofore
delivered to Purchaser is true, accurate, and complete and fairly
presents the information purported to be shown.
5.13 Environmental Matters. Without limiting the generality of this
Section 5.13:
(i) Sellers are in compliance in all material respects with
all applicable Environmental Laws (as such term is defined in Exhibit A
hereto);
(ii) Sellers have obtained all material permits and approvals
required under Environmental Laws, including, without limitation, all
material environmental, health and safety permits, licenses, approvals,
authorizations, variances, agreements, and waivers of federal, state,
and local governmental authorities ("Permits") necessary for the
conduct of the business and the operation of the facilities of Aqua
Vision International, and all such Permits are in good standing and
Sellers are in compliance with all terms and conditions of such
Permits;
(iii) Neither Sellers nor any of their currently or previously
owned or leased property utilized in the operation of AQUA VISION
INTERNATIONAL has been named as a potentially responsible party or is
subject to any outstanding written order from or agreement with any
federal, state, or local governmental authority or other person or is
subject to any judicial or docketed administrative proceeding
respecting (x) Environmental Laws, (y) Remedial Action (as such term is
defined in Exhibit A hereto), or (z) any material Environmental
Liabilities and Costs (as such term is defined in Exhibit A hereto);
(iv) Except as set forth on the Disclosure Schedule, there are
no conditions or circumstances associated with the currently or
previously owned or leased properties or operations of Sellers related
to the operation of AQUA VISION INTERNATIONAL that may give rise to
Environmental Liabilities and Costs.
(v) Sellers have not received any notice or claim to related
to the operation of AQUA VISION INTERNATIONAL to the effect that they
are or are reasonably expected to be liable to any person as a result
of a Release (as such term is
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defined in Exhibit A hereto) or threatened Release or any notice letter
or request for information under CERCLA (as such term is defined in
Exhibit A hereto); and
(vi) No Environmental Lien (as such term is defined in Exhibit
A hereto) and no unrecorded Environmental Lien of which Sellers have
notice has attached to any property of Seller which relates to Aqua
Vision International.
5.14 Trademarks, Trade Secrets, Licenses, Etc. The Disclosure Schedule
sets forth all of the trademarks, trade secrets, trade names, service
marks, patents, copyrights, registrations, or applications with respect
thereto, and licenses or rights under them owned, used, or intended to
be acquired or used by Sellers in the business of Aqua Vision
International, and, to the extent indicated in the Disclosure Schedule,
they have been duly registered in such offices as are indicated
therein. Sellers are the sole and exclusive owners of the trademarks,
trade secrets, trade names, service marks, and copyrights, the holders
of the full record title to the trademark registrations and the sole
owner of the inventions covered by the patents and patent applications,
all as set forth in the Disclosure Schedule; Sellers have the sole and
exclusive right, to the extent listed in the Disclosure Schedule, to
use such trademarks, trade secrets, trade names, service marks, patents
and copyrights, and, except to the extent set forth on the Disclosure
Schedule, all of them are free and clear of any mortgages, liens,
encumbrances, equities, licenses, claims, and obligations to other
persons of whatever kind and character.
5.15 Insurance Policies. The insurance policies listed and described
briefly in the Disclosure Schedule constitute all of the policies in
force and effect in respect of the business, properties and assets,
including, without limitation, insurance on personnel, of Aqua Vision
International. Sellers are not in default under any such policy. The
insurance policies so listed and identified are sufficient in nature,
scope, and amounts to insure adequately (and, in any event, in amounts
sufficient to prevent Sellers from becoming a co-insurer within the
terms of such policies) the business, properties, and assets of Aqua
Vision International. Sellers have not been refused insurance by any
insurance carrier to which they have applied for insurance on behalf of
Aqua Vision International.
5.16 Extraordinary Events. From the end of its most recent fiscal year
to the date hereof, neither the business nor
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properties nor condition, financial or other, nor results of operations
of Aqua Vision International have been materially and adversely
affected in any way as the result of any fire, explosion, accident,
casualty, labor disturbance, requisition, or taking of property by any
governmental body or agency, flood, embargo, or Act of God or the
public enemy, or cessation, interruption, or diminution of operations,
whether or not covered by insurance.
5.17 Adverse Restrictions. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby are not
events that of themselves or with the giving of notice or the passage
of time or both, could constitute, on the part of Sellers, a violation
of or conflict with or result in any breach of, or default under the
terms, conditions, or provisions of, any judgment, law, or regulation,
or any agreement or instrument to which Sellers are a party or by which
they are bound, or result in the creation or imposition of any lien,
charge, or encumbrance of any nature whatsoever on the property or
assets of Aqua Vision International and no such event of itself or with
the giving of notice or the passage of time or both will result in the
acceleration of the due date of any obligation of Sellers as it relates
to Aqua Vision International.
5.18 Material Information. Neither the Financial Statements nor this
Agreement (including the Schedules and Exhibits hereto) nor any
certificate or other information or document furnished or to be
furnished by Sellers to Purchaser contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact required to be stated herein or therein or necessary to make the
statements herein or therein not misleading.
5.19 Products in Warranty. Attached as part of the Disclosure Schedule
are true and correct copies of Aqua Vision International's standard
warranty agreements used in connection with its business operations.
Aqua Vision International's standard warranty agreements apply to each
product in warranty except as otherwise indicated on the Disclosure
Schedule. Sellers are not in violation in any material respect of any
such warranty agreement.
5.20 Certain Transactions. Sellers are not presently parties to any
transaction with Aqua Vision International, including, without
limitation, any contract, agreement, or other arrangement providing for
the furnishing of services to or by, providing for rental of real or
personal property to or from,
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or otherwise requiring payments to or from Sellers, any member of
Sellers' family or any corporation, partnership, trust, or other entity
in which Sellers have a substantial interest or are an officer,
director, trustee, or partner.
5.21 No Governmental Authorizations or Approvals Required. No
authorization or approval of, or filing with, any governmental agency,
authority, or other body will be required in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
5.22 Continuing Representations. The representations and warranties of
Sellers herein contained (a) relating to non-tax matters shall survive
the Closing for a period of three (3) years and (b) relating to tax
matters shall survive the Closing for the applicable statute of
limitations.
6. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF PURCHASER.
6.1 Due Authorization; Effect of Transaction. Purchaser is a
corporation duly organized, validly existing, and in good standing
under the laws of its jurisdiction of operation and is duly qualified
and in good standing in each other jurisdiction in which it owns or
leases properties, conducts operations, or maintains a stock of goods,
with full power and authority to carry on the business in which it is
engaged (a true and correct list of each such jurisdiction is set forth
in the Disclosure Schedule) and to execute and deliver and carry out
the transactions contemplated by this Agreement. No provision of
Purchaser's Certificate of Incorporation or By-Laws, or of any
agreement, instrument, or understanding, or any judgment, decree, rule,
or regulation, to which Purchaser is a party or by which it is bound,
has been, or will be violated by the execution by Purchaser of this
Agreement or the performance or satisfaction of any agreement or
condition herein contained upon its part to be performed or satisfied,
and all requisite corporate and other authorizations, including all
necessary governmental authorizations, for such execution, delivery,
performance, and satisfaction have been duly obtained. Upon execution
and delivery, this Agreement will be a legal, valid, and binding
obligation of Purchaser, enforceable in accordance with its terms.
Purchaser is not in default in the performance, observance, or
fulfillment of any of the terms or conditions of its Certificate of
Incorporation or By-Laws.
6.2 Continuing Representations. The representations and warranties of
Purchaser herein contained (a) relating to
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non-tax matters shall survive the Closing for a period of three
(3) years and (b) relating to tax matters shall survive the Closing for
the applicable statute of limitations.
7. COVENANTS AND AGREEMENTS.
7.1 Sellers, Covenants and Agreements Pending Final Delivery of All
Documents. Sellers, from the Closing Date until the date upon which all
documents have been delivered and all requirements under this Agreement
have been performed,
(a) will operate the business of Aqua Vision International in
the normal, usual, and customary manner in the ordinary and regular
course of business;
(b) will not sell or otherwise dispose of any of the
properties or assets related to the operation of AQUA VISION
INTERNATIONAL, other than inventory of finished goods sold in the
ordinary course of business;
(c) except in each case in the ordinary course of business,
(i) will not amend or terminate any outstanding
lease, contract, or agreement related to the operation of AQUA
VISION INTERNATIONAL,
(ii) will not incur any obligations or liabilities
(fixed, contingent, or other) related to the operation of AQUA
VISION INTERNATIONAL, and
(iii) will not enter into any commitments related to
the operation of AQUA VISION INTERNATIONAL;
(d) will not make any unusual transactions in its inventory or
any additions to its property or any purchases of machinery or
equipment, except for normal maintenance and replacements;
(e) will not discharge or satisfy any lien or encumbrance or
pay any obligation or liability (absolute or contingent) other than
current liabilities or obligations under contracts now existing or
hereafter entered into in the ordinary course of business, and
commitments under leases now existing;
(f) will not mortgage, pledge, or subject to lien or any other
encumbrances, any of its assets, tangible or intangible
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unless such mortgage, pledge, lien, or encumbrance is discharged before
the Closing;
(g) will not sell or transfer any tangible asset or cancel any
debts or claims except in each case in the ordinary course of business;
(h) will not sell, assign, or transfer any patents,
trademarks, trade names, trade secrets, copyrights, or other intangible
assets;
(i) will not increase the compensation payable or to become
payable to any of its employees or agents;
(j) will not suffer any material damage, destruction, or loss
(whether or not covered by insurance) or any acquisition or taking of
property by any governmental authority;
(k) will not waive any rights of substantial value; or
(l) will not enter into any other transaction or transactions
that individually or in the aggregate are material to the business of
Aqua Vision International.
8. CONDITIONS OF PURCHASER'S OBLIGATIONS.
The obligations of Purchaser hereunder are subject to the fulfillment
to the reasonable satisfaction of the Purchaser, prior to or at the
Closing, of each of the following conditions:
8.1 No Opposition. No suit, action, or proceeding shall be pending or
threatened at any time prior to or on the Closing Date before or by any
court or governmental body (a) seeking to restrain or prohibit, or to
obtain damages or other relief in connection with, the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby; or (b) that might materially and adversely affect
the business or properties or condition, financial or other, or results
of operations of Sellers.
8.2 Permits, Etc. Sellers shall have assigned to Purchaser, or
Purchaser shall have obtained, all such permits, licenses, approvals,
authorizations, variances, agreements, and warranties from federal,
state, and local governmental authorities related to the operation of
Aqua Vision International, which Purchaser shall, in the exercise of
its sole discretion, deem necessary or desirable for the operation
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by Purchaser of the businesses of Aqua Vision International after the
Closing.
8.3 Insurance. Sellers shall have obtained appropriate binders or
consents as to policies of insurance to be assigned to Purchaser
hereunder.
8.4 Representations and Covenants. The representations and warranties
of Sellers contained in this Agreement or otherwise made in writing by
it or him or on his behalf pursuant hereto or otherwise made in
connection with the transactions contemplated hereby shall be true and
correct at and as of the Closing Date with the same force and effect as
though made on and as of such date; each and all of the covenants,
agreements, and conditions to be performed or satisfied by Sellers
hereunder at or prior to the Closing Date shall have been duly
performed or satisfied; and Sellers shall have furnished Purchaser with
such certificates and other documents evidencing the truth of such
representations and warranties and the performance and satisfaction of
such covenants, agreements, and conditions as Purchaser shall have
reasonably requested.
8.5 Instruments of Transfer. Sellers shall have delivered to Purchaser
bills of sale, assignments, deeds, stock powers, and other instruments
of transfer and assignment in accordance with the provisions hereof,
transferring to Purchaser all of Sellers' right, title, and interest in
and to the Assets, including the Assigned Contracts, to be transferred,
sold, assigned, and conveyed by Sellers to Purchaser pursuant to the
provisions of this Agreement.
8.6 Tax Waiver. Sellers, if applicable, shall have received copies of a
waiver of lien certificate from the appropriate tax authorities of all
applicable jurisdictions (other than the U.S. Internal Revenue
Service).
8.7 Tax Allocation. Sellers and Purchaser shall have finalized tax
allocation as of December 31, 1997.
8.8 Solvency Certificate. Sellers shall have delivered a solvency
certificate, dated the Closing Date, (in form and substance
satisfactory to Purchaser) signed by the appropriate representative of
Sellers.
8.9 Diligence. Purchaser shall have completed its diligence review of
the business, properties, assets, and liabilities of Sellers to the
extent related to the operation of AQUA VISION
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<PAGE> 23
INTERNATIONAL, with results satisfactory to Purchaser.
9. CONDITIONS OF SELLERS OBLIGATIONS.
The obligations of Sellers hereunder are subject to the fulfillment to
the reasonable satisfaction of Sellers prior to or at the Closing of
each of the following conditions:
9.1 Representations and Covenants. The representations and warranties
of Purchaser contained in this Agreement or otherwise made in writing
by it or on its behalf pursuant hereto or otherwise made in connection
with the transactions contemplated hereby shall be true and correct at
and as of the Closing Date with the same force and effect as though
made on and as of such date; each of the covenants, agreements, and
conditions to be performed or satisfied by Purchaser hereunder at or
prior to the Closing Date shall have been duly performed or satisfied;
and Purchaser shall have furnished Sellers with such certificates or
other documents evidencing the truth of such representations and
warranties and the performance and satisfaction of such covenants,
agreements, and conditions as Sellers shall have reasonably requested.
9.2 No Opposition. No suit, action, or proceeding shall be pending or
threatened on the Closing Date before or by any court or governmental
authority seeking to restrain or prohibit the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby.
10. INDEMNIFICATION BY SELLERS.
10.1 Indemnification.
(a) Sellers hereby agree to indemnify, defend, and hold
Purchaser and its shareholders (collectively with Purchaser, the
"Purchasing Parties") harmless from and against the amount of any
actual (or potential in the case of any litigation or claims by any
person not a party to this Agreement) damage, loss, cost, or expense
(including reasonable attorneys' fees and settlement costs) to
Purchasing Parties("Loss") occasioned or caused by, resulting from, or
arising out of:
(i) Any failure by Sellers to perform, abide by, or
fulfill any of the agreements, covenants, or obligations set
forth in or entered into, in connection with this Agreement to
be so performed or fulfilled by Sellers.
(ii) Any material inaccuracy in or breach of any of
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<PAGE> 24
the representations or warranties of Sellers set forth in this
Agreement, or any certificate or Schedule or other writing
furnished pursuant hereto.
(iii) Any failure on the part of Purchaser to
withhold from the Purchase Price any amount due by Sellers to
any governmental authority or other person that results in a
loss to Purchaser.
(iv) Any claim, known or unknown, arising out of or
by virtue of or based upon any liability or obligation of
Sellers that is not an Assumed Liability.
(v) Any claim, known or unknown, arising out of or by
virtue of or based upon any contract or agreement of Sellers
that (I) is not an Assigned Contract, or (ii) is connected
with any breach by Sellers of an Assigned Contract or any
failure by Sellers to have performed any obligation or
satisfied any liability thereunder to the extent required to
be performed or satisfied at or prior to the Closing, or (iii)
is not set forth (or described) in writing and furnished or
made available to Purchasing Parties pursuant hereto.
(vi) Any liability or obligation for any tort or any
breach or violation of any contractual, quasi-contractual,
legal, fiduciary, or equitable duty by Sellers, whether
before, at, or after the Closing.
The amount of any Loss shall be the amount of cash
reimbursement or set-off that, when received by the Purchasing Party or
Purchasing Parties incurring such loss, shall place such Purchasing
Party or Purchasing Parties in the same financial position it or they
would have been in if such Loss has not occurred. Sellers' liability
under this paragraph shall not however, exceed the aggregate amount of
$2,500,000. Notwithstanding any other provision of this agreement, the
Sellers shall not be liable to the Purchasing Parties on any warranty,
representation, or covenant made by Sellers in this agreement, or under
any of their indemnities in this agreement, regarding any single claim,
loss, expense, obligation, or other liability that does not exceed
$50,000; provided, however, that when the aggregate amount of all such
claims, losses, expenses, obligations, and liabilities not exceeding
$50,000 each reaches $50,000, the Sellers shall, subject to the above
limitation on their maximum aggregate liability, thereafter be liable
in full for all those breaches and indemnities and regarding all those
claims, losses, expenses, obligations, and liabilities.
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<PAGE> 25
10.2 Notice of Claim. Purchasing Parties shall give prompt written
notice to Sellers of any claim (actual or threatened) or other event
that in the judgment of either Purchasing Party might result or has
resulted in a Loss by a Purchasing Party hereunder, and Sellers shall
have the right to assume the defense of such claim or any litigation
resulting therefrom; provided that counsel for the Sellers, who shall
conduct the defense of such claim (actual, threatened, or asserted) or
litigation, shall be reasonably satisfactory to the Purchasing Parties,
and Purchasing Parties may participate in such defense at their
expense, and provided, further, that the omission by Purchasing Parties
to give notice as provided herein shall not relieve Sellers of their
obligations hereunder except to the extent that the omission results in
a failure of actual notice to the Sellers, and Sellers are damaged
solely as a result of the failure to give notice. Sellers, in the
defense of any such claim or litigation, shall not, except with the
consent of each Purchasing Party, consent to the entry of any judgment
or decree or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
Purchasing Parties of a release from all liability in respect to such
claim or litigation, and Sellers shall not have liability with respect
to any payment made by a Purchasing Party in connection with the
settlement, satisfaction, or compromise of any claim unless the Sellers
shall have approved thereof in advance in writing, which approval shall
not unreasonably be withheld or delayed. If the Purchasing Parties
shall not have received notice that the Sellers shall assume the
defense of such claim within twenty (20) days after the notice is sent
to the Sellers of the existence of such claim, the Purchasing Parties
shall be free to proceed with the defense of such claim. Each such
notice shall be accompanied (or followed as promptly as is reasonably
practicable after the amount of such Loss becomes determinable) by a
certificate signed by the President of Purchaser and setting forth in
reasonable detail the calculation of the amount of such Loss in
accordance with the provisions hereof, and accompanied by copies of all
relevant documents and records. The omission to give such notice or
provide such certificate by Purchasing Parties shall not relieve
Sellers of their obligation under this Section 10.2 except to the
extent such omission results in a failure of actual notice to the
Sellers, and Sellers are damaged solely by such failure to give notice.
No Loss shall be considered to have occurred with respect to any
payment made by any Purchasing Parties in settlement, satisfaction, or
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<PAGE> 26
compromise of any claim unless the Sellers shall have approved thereof
in advance and in writing.
10.3 Set-Off or Reimbursement. Purchasing Parties shall have the right
to set-off against the payment of the Purchase Price payable by
Purchaser as provided for herein (or, if such amounts have theretofore
been paid, then to receive prompt reimbursement from Sellers of an
amount equal to) the amount of all Losses incurred by Purchasing
Parties. Purchasing Parties shall deliver to Sellers a written notice
explaining the nature and amount of each such set-off or required
reimbursement as promptly as is reasonably practicable after Purchasing
Parties shall have determined to make such set-off or to require such
reimbursement. Purchasing Parties may make such set-offs or require
such reimbursements in any order they choose.
11. INDEMNIFICATION BY PURCHASER.
11.1 Indemnification.
(a) Purchaser hereby agrees to indemnify, defend, and hold
Sellers and its owners (collectively with Sellers, the "Selling
Parties") harmless from and against the amount of any actual (or
potential in the case of any litigation or claims by any person not a
party to this Agreement) damage, loss, cost, or expense (including
reasonable attorneys' fees and settlement costs) to Selling
Parties("Loss") occasioned or caused by, resulting from, or arising out
of:
(i) Any failure by Purchaser to perform, abide by, or
fulfill any of the agreements, covenants, or obligations set
forth in or entered into, in connection with this Agreement to
be so performed or fulfilled by Purchaser.
(ii) Any material inaccuracy in or breach of any of
the representations or warranties of Purchaser set forth in
this Agreement, or any certificate or Schedule or other
writing furnished pursuant hereto.
(iii) Any liability or obligation for any tort or any
breach or violation of any contractual, quasi-contractual,
legal, fiduciary, or equitable duty by Purchaser, whether
before, at, or after the Closing.
The amount of any Loss shall be the amount of cash
reimbursement that, when received by the Selling Parties
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<PAGE> 27
incurring such loss, shall place such Selling Parties in the same
financial position it or they would have been in if such Loss has not
occurred. Notwithstanding any other provision of this agreement,
Purchaser shall not be liable to the Selling Parties on any warranty,
representation, or covenant made by Purchaser in this agreement, or
under any of its indemnities in this agreement, regarding any single
claim, loss, expense, obligation, or other liability that does not
exceed $50,000; provided, however, that when the aggregate amount of
all such claims, losses, expenses, obligations, and liabilities not
exceeding $50,000 each reaches $50,000, the Purchaser shall, subject to
the above limitation on its maximum aggregate liability, thereafter be
liable in full for all those breaches and indemnities and regarding all
those claims, losses, expenses, obligations, and liabilities.
11.2 Notice of Claim. Selling Parties shall give prompt written notice
to Purchaser of any claim (actual or threatened) or other event that in
the judgment of any Selling Party might result or has resulted in a
Loss by a Selling Party hereunder, and Purchaser shall have the right
to assume the defense of such claim or any litigation resulting
therefrom; provided that counsel for the Purchaser, who shall conduct
the defense of such claim (actual, threatened, or asserted) or
litigation, shall be reasonably satisfactory to the Selling Parties,
and Selling Parties may participate in such defense at their expense,
and provided, further, that the omission by Selling Parties to give
notice as provided herein shall not relieve Purchaser of its
obligations hereunder except to the extent that the omission results in
a failure of actual notice to the Purchaser, and Purchaser is damaged
solely as a result of the failure to give notice. Purchaser, in the
defense of any such claim or litigation, shall not, except with the
consent of each Selling Party, consent to the entry of any judgment or
decree or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
Selling Parties of a release from all liability in respect to such
claim or litigation, and Purchaser shall not have liability with
respect to any payment made by a Selling Party in connection with the
settlement, satisfaction, or compromise of any claim unless the
Purchaser shall have approved thereof in advance in writing, which
approval shall not unreasonably be withheld or delayed. If the Selling
Parties shall not have received notice that the Purchaser shall assume
the defense of such claim within twenty (20) days after the notice is
sent to the Purchaser of the existence of such claim, the Selling
Parties shall be free to proceed with the defense of such claim. Each
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<PAGE> 28
such notice shall be accompanied (or followed as promptly as is
reasonably practicable after the amount of such Loss becomes
determinable) by a certificate signed by the President of Purchaser and
setting forth in reasonable detail the calculation of the amount of
such Loss in accordance with the provisions hereof, and accompanied by
copies of all relevant documents and records. The omission to give such
notice or provide such certificate by Selling Parties shall not relieve
Purchaser of their obligation under this Section 11.2 except to the
extent such omission results in a failure of actual notice to the
Purchaser, and Purchaser are damaged solely by such failure to give
notice. No Loss shall be considered to have occurred with respect to
any payment made by any Selling Parties in settlement, satisfaction, or
compromise of any claim unless the Purchaser shall have approved
thereof in advance and in writing.
12. BULK SALES ACT.
The Purchaser and the Sellers both acknowledge that, in effecting the
transactions contemplated hereby, neither the Purchaser nor the Sellers
have taken any steps to comply with the California Bulk Sales Law.
Notwithstanding the foregoing, the Sellers covenant and agree to pay
and discharge promptly and when due, and in all respects to defend the
Purchaser against, all claims of creditors (other than the Assumed
Liabilities) that are asserted against the Purchaser by reason of
noncompliance with this Bulk Sales Law. The Sellers hereby agree to
defend and to indemnify and hold the Purchaser harmless from, against,
and in respect of (and shall on receipt of evidence of loss, liability,
or damage reimburse the Purchaser for) any loss, liability, damage,
cost, or expense, including, without limitation, reasonable attorneys'
fees (other than the Assumed Liabilities), suffered or incurred by the
Purchaser by reason of any failure of the Sellers to pay or discharge
any such claim promptly and when due or the failure of the parties to
comply with the Bulk Sales Law.
13. BROKERAGE FEE.
Sellers and Purchaser each represent that no broker has been involved
in this transaction and each party agrees to indemnify and hold the
others harmless from payment of any brokerage fee, finder's fee, or
commission claimed by any party who claims to have been involved
because of association with such party.
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<PAGE> 29
14. AMENDMENTS; WAIVERS.
This Agreement constitutes the entire agreement of the parties related
to the subject matter of this Agreement, supersedes all prior or
contemporary agreements, representations, warranties, covenants, and
understandings of the parties. This Agreement may not be amended, nor
shall any waiver, change, modification, consent, or discharge be
effected, except by an instrument in writing executed by or on behalf
of the party against whom enforcement of any amendment, waiver, change,
modification, consent, or discharge is sought.
Any waiver of any term or condition of this Agreement, or of the breach
of any covenant, representation, or warranty contained herein, in any
one instance, shall not operate as or be deemed to be or construed as a
further or continuing waiver of such term, condition, or breach of
covenant, representation, or warranty, nor shall any failure at any
time or times to enforce or require performance of any provision hereof
operate as a waiver of or affect in any manner such party's right at a
later time to enforce or require performance of such provision or of
any other provision hereof; and no such written waiver, unless it, by
its own terms, explicitly provides to the contrary, shall be construed
to effect a continuing waiver of the provision being waived and no such
waiver in any instance shall constitute a waiver in any other instance
or for any other purpose or impair the right of the party against whom
such waiver is claimed in all other instances or for all other purposes
to require full compliance with such provision.
15. ASSIGNMENT; SUCCESSORS AND ASSIGNS.
This Agreement shall not be assignable by any party without the written
consent of the others. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
16. SEVERABILITY.
If any provision or provisions of this Agreement shall be, or shall be
found to be, invalid, inoperative, or unenforceable as applied to any
particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision
with any constitution or statute or rule of public policy or for any
other reason, such circumstance shall not have the effect of rendering
the provision or provisions in question invalid, inoperative, or
unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative, or
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<PAGE> 30
unenforceable to the extent that such other provisions are not
themselves actually in conflict with such constitution, statute, or
rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid,
inoperative, or unenforceable provision had never been contained herein
and such provision reformed so that it would be valid, operative, and
enforceable to the maximum extent permitted in such jurisdiction or in
such case.
17. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument, and in pleading or proving any
provision of this Agreement it shall not be necessary to produce more
than one such counterpart.
18. SECTION AND OTHER HEADINGS.
The headings contained in this Agreement are for reference purposes
only and shall not in any way effect the meaning or interpretation of
this Agreement.
19. NOTICES.
All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, certified mail, return receipt
requested:
(a) TO SELLERS: If to Sellers:
c/o Select Property Investments, LLC
4012 S. Rainbow Blvd, Ste 111
Las Vegas, Nevada 89103-2010
(b) TO PURCHASER: If to Purchaser, to:
1920 Main Street, Suite 1020
Irvine, CA 92714
with a copy to:
David Wagner & Associates, P.C.
Penthouse Suite
8400 East Prentice Ave.
Englewood, CO 80111
and/or to such other person(s) and address(es) as either party
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<PAGE> 31
shall have specified in writing to the other.
19. GENDER.
Whenever used herein, the singular number shall include the plural, the
plural shall include the singular, and the use of any gender shall
include all genders.
20. LAW TO GOVERN.
This Agreement shall be governed by and construed and enforced in
accordance with the law (other than the law governing conflict of law
questions) of Nevada.
21. COURTS.
Any action to enforce, arising out of, or relating in any way to, any
of the provisions of this Agreement may be brought and prosecuted in
such court or courts located in Nevada as is provided by law; and the
parties consent to the jurisdiction of the court or courts located in
Nevada and to service of process by registered mail, return receipt
requested, or in any other manner provided by law.
IN WITNESS WHEREOF, Sellers and Purchaser have caused this Agreement to
be executed as of the date first above written.
[PURCHASER]
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
By: /////Signed/////
----------------------------------------
Name: DuSean Berkich
--------------------------------------
Title: President
-------------------------------------
[SELLERS]
SELECT PROPERTY INVESTMENTS, LLC
By: ////Signed////
----------------------------------------
Name: Carl Palmer
--------------------------------------
Title: Manager
-------------------------------------
THE TAM IRREVOCABLE TRUST
By: ////Signed////
----------------------------------------
Name: Carl Palmer
--------------------------------------
Title: Trustee
-------------------------------------
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<PAGE> 32
EXHIBIT A
Certain Defined Terms
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act (42 U.S.C. Section 9601 et seq.), as amended or
supplemented from time to time.
"Contaminant" means any waste, pollutant, hazardous material, hazardous
substance, toxic substance, hazardous waste, special waste, petroleum,
or petroleum-derived substance or waste, or any constituent of any such
pollutant material, substance or waste, including, without limitation,
any pollutant material, substance, or waste regulated under any
Environmental Law.
"Environmental Laws" means all federal, state, local, and foreign laws
or regulations, codes, orders, decrees, judgments, or injunctions
issued, promulgated, approved, or entered thereunder relating to
pollution or protection of the environment or occupational health and
safety, including, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances,
materials, or wastes (including, without limitation, oil, asbestos, and
radiation) into the environment (including, without limitation, ambient
air, surface water, ground water, land surface, or subsurface strata)
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals or industrial, toxic, or hazardous
substances, material, or wastes. Environmental Laws shall include,
without limitation, CERCLA, the Hazardous Material Transportation Act
(49 U.S.C. Section 1801 et seq.), the Solid Waste Disposal Act (42
U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act
(33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. Section 136 et seq.), the Food, Drug, and Cosmetic Act (21
U.S.C. Section 301 et seq.), the Medical Waste Tracking Act of 1988,
Pub. L. No. 100-582, 102 Stat. 2950 (1988), as such laws have been
amended or supplemented from time to time, and any analogous future
federal, or present or future state, local, or foreign, statutes,
ordinances, or bylaws.
"Environmental Liabilities and Costs" means, as to the Sellers, all
liabilities, obligations, responsibilities, remedial actions, losses,
damages, punitive damages, consequential damages, treble damages,
costs, and expenses (including, without limitation, all reasonable
fees,
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<PAGE> 33
disbursements and expenses of counsel, expert and consulting fees, and
costs of investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or demand, by
any corporation, partnership, trust, individual, or other entity
("Person"), whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including,
without limitation, any Environmental Law, permit, order, approval,
authorization, license, variance, or agreement with a federal, state,
or local governmental authority or other person, arising from
environmental, health, or safety conditions or a Release or threatened
Release resulting from the past operations of the Sellers (or any of
its predecessors in interest), or any release for which the Sellers are
otherwise responsible under any Environmental Law.
"Environmental Lien" means any lien or similar interest in favor of any
federal, state, or local governmental authority for Environmental
Liabilities and Costs.
"Release" means, as to the Sellers, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
pouring, emptying, escaping, dumping, discarding, leaching, or
migration of a Contaminant into the indoor or outdoor environment or
into or out of any property owned, leased, or controlled by Sellers,
including, without limitation, the movement of Contaminants through or
in the air, soil, surface water, groundwater, or property, including,
without limitation, the abandonment or discarding of barrels,
containers, and other closed receptacles containing any contaminant.
"Remedial Action" means all actions necessary to (i) clean up, remove,
treat, or in any other way address Contaminants in the indoor or
outdoor environment, (ii) prevent a Release or condition that is
reasonably likely to result in a Release or minimize further release of
Contaminants so they do not migrate or endanger or threaten to endanger
present or future public health or welfare or the indoor or outdoor
environment, or (iii) perform pre-remedial studies and investigations
and post-remedial monitoring and care.
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<PAGE> 34
DISCLOSURE SCHEDULE
SCHEDULE OF ASSETS
I. Home Savings - General Operation Account
(See Exhibit "A") Copy of Account Status as of 2/18/98
II. Investments - Cash $65,000
III. Accounts Receivable (See Exhibit "B") - Report of Accounts
Receivable run 2/20/98 showing 2/28/98 end.
IV. Inventory (See Exhibit "C") - Report of all Inventory on hand
run 2/20/98 reports to 2/28/98.
V. Property and Equipment
Tooling:
Pump n'Pure housing - injection mold;
Filters - 3 18 cavity 1 1/4" x 2 1/2", check valve
filter, aqua mist primary filter;
Bottle cap and poppet;
Bottles - 18 oz, 30 oz bottoms-up, 32 oz, canteen,
and baby bottle, Adapter; check valve; baby bottle
adapter; adapter/bottoms-up; designer cap;
counter-top housing; All silk-screen artwork (2 dozen
private labels)
Vehicles:
1996 Plymouth Breeze - automatic
1995 Chevrolet Tahoe - 4x4/auto
Furniture & Fixtures:
2 - oak coffee tables, 1 - oak sofa table, 1 small
couch, 1 - glass reception desk, 4-6 various
executive chairs, 3 - wall display panels, 1 -
refrigerator, 1 - coffee pot, 1 - microwave, 1 -
storage cabinet, 1 - executive desk and return, 2 -
office desks, 1 - HON sectional desk system, 1 -
computer desk, 2 - desk lights, 4 - 2 drawer filing
cabinets, 2 - 4 drawer file cabinets, 1 small supply
cabinet, 1 - 2 piece wall unit, 1 - bookcase, misc.
Shop Equipment:
1 - bagging machine, 1 - air compressor, 2 -
production carts, 5 - 8'steel rack systems, 2 - 10'
production tables, 2 portable production tables, 2 -
glue pots, 4 - glue guns, 2 - motorized glue
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<PAGE> 35
stations, 1 - drill press, 1 - shop scale, 1 -
shipping table, 1 - packing table, 2 - tape guns,
packing tape, 1 - socket set, 1 - hand-truck,
miscellaneous manual and electrical hand-tools,
chairs, light fixtures, heaters.
Computer Equipment:
1 - 386 computer, 1 - Pentium 486 PC to include
software: Peachtree, Corel Draw, MS Word, Excel...;
1- NEC laser printer, 1 - dot matrix continuous feed
printer, 1 - Panasonic plain paper fax machine, 2 - 2
line phones, 2 - portable phones, 1 - Kyocera laser
printer.
VI. Business Goodwill and going concern value.
VII. Trade secret - All process, design, production and use
technology including contracts: confidentiality, source of
supply, and exclusive manufacturing agreements (Exhibit "F").
VIII. Trademark (See Exhibit "D") - copy of U.S. Dept. of Comm. -
TM.
IX. Patent - all right, title and interest in and to United States
Patent Application SN08/813,286 "Portable water filtration
system and method" filed 12-23-96, and all related domestic or
international rights (case #96567) (See Exhibit "E") - copy of
patent pending.
X. Insurance Policy - Essex Insurance Company; Policy #3CB2904
(See Exhibit "F") - copy of policy.
XI. Assigned Contracts - refer to VII above. (See Exhibit "G") -
copies of each supplier contract Kx, Barneby Sut Cliff,
Interflo, Englehard.
XII. All Product Drawing & Designs - on file.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE PURCHASE
AGREEMENT OF WHICH THIS SCHEDULE FORMS A PART, THE PARTIES EXPRESSLY
ACKNOWLEDGE AND AGREE THAT THE INTELLECTUAL PROPERTY AND RELATED RIGHTS
OF THE SELLERS CONVEYED HEREBY DOES NOT INCLUDE ALL OR ANY PART OF THE
INVENTIONS, CONCEPTS OR OTHER INTELLECTUAL PROPERTY RIGHTS DEVELOPED BY
CARL AND MICHELLE PALMER, COMMONLY REFERRED TO AS THE "BABY BOTTLE" AND
"POINT OF ENTRY" CONCEPTS, THE "BOTTOMS UP" DESIGN CONCEPT AND PATENT
APPLICATION ("BOTTOMS-UP" DESIGN/UTILITY APPLICATION FEBRUARY 17,
1998), OR THE STERILIZATION PRODUCT LINE.
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<PAGE> 36
Listing of Assigned Contracts:
None.
Listing of Liens Affecting the Assets:
None.
Disclosure regarding Financial Statements:
The Parties agree to accept the financial statements as presented and accept any
deviations therein from compliance with GAAP standards.
SCHEDULE OF LIABILITIES
I. Accounts Payable, including without limitation
(See Exhibit "H").
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<PAGE> 1
10B
Amended Purchase Agreement with Aqua Vision
<PAGE> 2
AMENDED
PURCHASE AGREEMENT
between
SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC.
("Purchaser")
and
The TAM Irrevocable Trust and Select Property Investments, LLC
(Collectively "Sellers")
FEBRUARY 26, 1999
<PAGE> 3
AMENDED PURCHASE AGREEMENT
THIS AMENDED PURCHASE AGREEMENT (this "Agreement"), entered into this 26th day
of February, 1999 by and between SEYCHELLE ENVIRONMENTAL TECHNOLOGIES, INC, a
Nevada corporation ("Purchaser"), and THE TAM IRREVOCABLE TRUST, a California
Trust and SELECT PROPERTY INVESTMENTS, LLC, a Nevada Limited Liability Company
(collectively, "Sellers");
W I T N E S S E T H T H A T:
WHEREAS, Purchaser and Sellers had entered into an agreement dated January 31,
1998 for the sale to Purchaser all of the assets of AQUA VISION INTERNATIONAL,
a California sole proprietorship, upon the terms and subject to the conditions
set forth therein, which Agreement is attached as Exhibit A hereto; and
WHEREAS, the parties hereto wish to modify their prior agreement; and
WHEREAS, the parties wish to make only those changes to the agreement dated
January 31, 1998 as indicated herein.
NOW, THEREFORE, in consideration of the agreements of the parties hereto, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Purchase and Sale of Assets. Sellers have previously sold, conveyed,
transferred, assigned, and delivered to Purchaser, and Purchaser agreed to
purchase from Sellers all of the assets, properties, and business of every kind
and description and wherever situated used by Sellers in the operation of AQUA
VISION INTERNATIONAL.
2. Purchase Price. In consideration for the sale, conveyance, transfer, and
delivery of the assets, properties, and business of every kind and description
and wherever situated used by Sellers in the operation of AQUA VISION
INTERNATIONAL, Purchaser shall now pay to Sellers a payment of 8,000 shares of
Series AAA 12% Cumulative Convertible Preferred Shares of the Purchaser in lieu
of all consideration remaining unpaid under the agreement dated January 31,
1998, consisting of approximately $8,375,000. The said payments under this
paragraph shall be paid as follows: The TAM Irrevocable Trust, a California
trust (60%); and Select Property Investments, LLC, a Nevada Limited Liability
Company (40%). It is agreed by the parties that, upon written notice of
conversion from the Sellers, the Purchaser shall have 45 days from receipt of
such notice to repurchase for cash up to 2,000 shares of the Series AAA 12%
Cumulative Convertible
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Preferred Shares. The parties acknowledge that there is current litigation
involving Purchaser and Dusean Berkich, in which Purchaser is seeking to rescind
the issuance of all common shares in the Purchaser previously issued to Sellers
and Dusean Berkich. The Purchase Price in this Agreement has been determined by
assuming the complete cancellation, as a result of this litigation, of the
common shares now held by Sellers. It is specifically agreed by the parties to
this Agreement that the number of common shares issuable to Sellers pursuant to
the conversion provisions of the Series AAA 12% Cumulative Convertible Preferred
Shares shall be reduced share for share (but after pro rata adjustments, if any,
for stock dividends, stock splits, reverse stock splits, and any other similar
capital stock adjustments of a general nature for the Purchaser) by the number
of common shares of Purchaser held by Sellers which are not canceled as a result
of such litigation.
3. Sellers' Representations and Warranties. Sellers hereby represent and
warrant, covenant and agrees that:
a) Organization and Authority. Aqua Vision International is a sole
proprietorship duly organized, validly existing, and in good standing under the
laws of its jurisdiction of operation and is duly qualified and in good standing
in each other jurisdiction in which it owns or leases properties, conducts
operations, or maintains a stock of goods, with full power and authority to
carry on the business in which it is engaged and to execute and deliver and
carry out the transactions contemplated by this Agreement.
b) Due Authorization; Effect of Transaction. No provisions of any agreement,
instrument, or understanding, or any judgment, decree, rule, or regulation, to
which Aqua Vision International is a party or by which it is bound, has been or
will be violated by the execution and delivery by Sellers of this Agreement or
the performance or satisfaction of any agreement or condition herein contained
upon its part to be performed or satisfied, and all requisite authorizations for
such execution, delivery, performance, and satisfaction have been duly obtained.
Upon execution and delivery, this Agreement will be a legal, valid, and binding
obligation of Sellers, enforceable in accordance with its terms.
4. Due Authorization; Effect of Transaction. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of operation and is duly qualified and in good standing in each
other jurisdiction in which it owns or leases properties, conducts operations,
or maintains a stock of goods, with full power and authority to carry on the
business in which it is engaged and to execute and deliver and carry out the
transactions
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contemplated by this Agreement. No provision of Purchaser's Certificate of
Incorporation or By-Laws, or of any agreement, instrument, or understanding, or
any judgment, decree, rule, or regulation, to which Purchaser is a party or by
which it is bound, has been, or will be violated by the execution by Purchaser
of this Agreement or the performance or satisfaction of any agreement or
condition herein contained upon its part to be performed or satisfied, and all
requisite corporate and other authorizations, including all necessary
governmental authorizations, for such execution, delivery, performance, and
satisfaction have been duly obtained. Upon execution and delivery, this
Agreement will be a legal, valid, and binding obligation of Purchaser,
enforceable in accordance with its terms. Purchaser is not in default in the
performance, observance, or fulfillment of any of the terms or conditions of
its Certificate of Incorporation or By-Laws.
5. Entire Agreement. This Agreement, and the agreement dated January 31, 1998,
which is attached hereto, constitutes the entire agreement of the parties
related to the subject matter of this Agreement. This Agreement supersedes all
prior or contemporary agreements, representations, warranties, covenants, and
understandings of the parties. This Agreement may not be amended, nor shall any
waiver, change, modification, consent, or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification, consent, or
discharge is sought.
Any waiver of any term or condition of this Agreement, or of the breach of any
covenant, representation, or warranty contained herein, in any one instance,
shall not operate as or be deemed to be or construed as a further or continuing
waiver of such term, condition, or breach of covenant, representation, or
warranty, nor shall any failure at any time or times to enforce or require
performance of any provision hereof operate as a waiver of or affect in any
manner such party's right at a later time to enforce or require performance of
such provision or of any other provision hereof; and no such written waiver,
unless it, by its own terms, explicitly provides to the contrary, shall be
construed to effect a continuing waiver of the provision being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance with such provision.
6. Assignment. This Agreement shall not be assignable by any party without the
written consent of the others. This Agreement shall be binding upon and shall
inure to the benefit
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of the parties hereto and their respective successors and permitted assigns.
7. Severability. If any provision or provisions of this Agreement shall be, or
shall be found to be, invalid, inoperative, or unenforceable as applied to any
particular case in any jurisdiction or jurisdictions, or in all jurisdictions
or in all cases, because of the conflict of any provision with any constitution
or statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question
invalid, inoperative, or unenforceable in any other jurisdiction or in any
other case or circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative, or unenforceable to the extent that such
other provisions are not themselves actually in conflict with such
constitution, statute, or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative, or unenforceable provision had never been contained herein and
such provision reformed so that it would be valid, operative, and enforceable
to the maximum extent permitted in such jurisdiction or in such case.
8. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument, and in pleading or proving any
provision of this Agreement it shall not be necessary to produce more than one
such counterpart.
9. Headings. The headings contained in this Agreement are for reference
purposes only and shall not in any way effect the meaning or interpretation of
this Agreement.
10. Notices. All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed, postage prepaid, certified mail, return receipt requested:
(a) TO SELLERS: If to Sellers:
c/o Select Property Investments, LLC
4012 S. Rainbow Blvd, Ste 111
Las Vegas, Nevada 89103-2010
(b) TO PURCHASER: If to Purchaser, to:
1046 Calle Recodo, Unit B
San Clemente, California 92673
with a copy to:
David Wagner & Associates, P.C.
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Penthouse Suite
8400 East Prentice Ave.
Englewood, CO 80111
and/or to such other person(s) and address(es) as either party shall have
specified in writing to the other.
11. Law To Govern. This Agreement shall be governed by and construed and
enforced in accordance with the law (other than the law governing conflict of
law questions) of Nevada.
12. Courts. Any action to enforce, arising out of, or relating in any way to,
any of the provisions of this Agreement may be brought and prosecuted in such
court or courts located in Nevada as is provided by law; and the parties consent
to the jurisdiction of the court or courts located in Nevada and to service of
process by registered mail, return receipt requested, or in any other manner
provided by law.
IN WITNESS WHEREOF, Sellers and Purchaser have caused this Agreement to be
executed as of the date first above written.
[PURCHASER]
SEYCHELLE ENVIRONMENTAL
TECHNOLOGIES, INC.
By: Signed
-----------------------------------
Name: Carl Palmer
---------------------------------
Title: President
--------------------------------
[SELLERS]
SELECT PROPERTY INVESTMENTS, LLC
By: Signed
-----------------------------------
Name: Carl Palmer
---------------------------------
Title: Manager
--------------------------------
By: Signed
-----------------------------------
Name: Michelle Rae Palmer
---------------------------------
Title: Manager
--------------------------------
THE TAM IRREVOCABLE TRUST
By: Signed
-----------------------------------
Name: Grace Wiles
---------------------------------
Title: Trustee
--------------------------------
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