<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 2, 1996
WATER-JEL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other Jurisdiction of Incorporation)
0-13049 13-3006788
(Commission File No.) (I.R.S. Employer Identification No.)
243 Veterans Boulevard Carlstadt New Jersey 07072
of principal executive offices) (zip code)
Registrant's telephone number including area code (201) 507-8300
<PAGE>
Item 1. Changes in Control of Registrant
On July 2, 1996, Water-Jel Technologies, Inc. (the "Company") acquired
Journeycraft, Inc., a New York corporation ("JCI"), and Theracom Communications,
Inc., a New York corporation ("THI"). Through its majority-owned subsidiary,
X-ceed Motivation, JCI provides services to major corporations in the field of
performance improvement and internal corporate communications. These services
include developing applications using emerging new media such as Internet sites,
CD-ROMs, and interactive awards catalogs. JCI is also involved in travel
technology and corporate travel management and consulting. THI provides
training, communications and data to the healthcare industry, including programs
to enhance the communications skills of healthcare professionals.
The transaction was consummated by merging wholly owned subsidiaries of
the Company into each of JCI and THI as a result of which JCI and THI became
wholly-owned subsidiaries of the Company. Pursuant to the Agreement and Plan of
Merger dated as of May 17, 1996 (the "Agreement"), in exchange for the merger,
the holders of JCI and THI stock received an aggregate of 3,500,000 shares of
the Company's Common Stock. Prior to this transaction the Company had 3,511,160
shares of Common Stock outstanding.
In connection with the Agreement, Peter Cohen resigned as a director of
the Company and the Board elected Mr. Norman Doctoroff as a director. The
position of Chief Executive Officer of the Company has been assumed by Werner
Haase, a director of the Company and the CEO and principal shareholder of both
JCI and THI. Nurit Kahane Haase, the wife of Werner Haase, was appointed Senior
Vice President of the Company. Under the terms of the Agreement, Mr. Haase has
the right to designate one additional member of the Board as soon as the Company
meets the information requirements in connection therewith in accordance with
the provisions of Section 14(f) of the Securities Exchange Act of 1934.
As a result of this transaction, control of the Company has
effectively passed to Mr. and Mrs. Haase. Mr. and Mrs. Haase now own
2,281,875 shares of the Company's Common Stock, representing approximately
32.5% of the Company's outstanding voting securities. Mr. Haase also holds
options to acquire an additional 243,750 shares of Common Stock of the
Company. Two other former shareholders of JCI acquired in excess of 5% of the
Company's Common Stock as a result of the transaction. These were William
Walters and Seneca Associates, who own approximately 7.1% and 5.7%,
respectively, of the Company's Common Stock outstanding after completion of
the transaction. There are no plans or arrangements whereby either Mr. Walters
or Seneca Associates will participate in the management of the Company.
Reference is made to Item 2 hereof for additional disclosures.
2
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On July 2, 1996, the Company acquired JCI and THI by merging wholly
owned subsidiaries into each of JCI and THI. Under the Agreement, the holders of
JCI and THI stock received an aggregate of 3,500,000 shares of the Company's
Common Stock.
The consideration paid by the Company was determined by arm's length
negotiations between JCI and THI and the Company. Mr. Werner Haase, the
principal shareholder of both JCI and THI prior to this transaction, is also a
director of the Company. Mr. Haase represented JCI and THI in the negotiations
and did not participate in the negotiation or evaluation of the transaction by
the Company's Board of Directors.
The Company has received an opinion from A. S. Goldmen & Company,
independent investment bankers, that the amount of stock issued as consideration
in the merger is fair to the Company and its shareholders from a financial point
of view.
Reference is made to Item 1 hereof for additional disclosures.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
Combined financial statements for Journeycraft, Inc. and affiliate for the two
fiscal years ended August 31, 1995 (audited) and as of and for the six months
ended February 29, 1996 (unaudited) are included at pages F-1 to F-12
following the signature page of this report.
(b) Pro Forma Financial Information
Unaudited pro forma condensed combined financials statements for Water-Jel
Technologies, Inc. and Journeycraft, Inc. and affiliate as of and for the six
months ended February 29, 1996 and as of and for the fiscal years ended August
31, 1995 and 1994 are included at pages F-13 to F-21 following the signature
page of this report.
(c) Exhibits
1 Agreement and Plan of Merger dated as of May 17, 1996,
by and among the Company, JCI, THI, JCI Acquisition Corp.,
THI Acquisition Corp. and Werner Haase.
2 Employment Agreement,dated as of July 1, 1996, by and among
the Company and Nurit Kahane Haase.
3 Fairness Opinion of A. S. Goldmen & Company dated May 21,
1996.
3
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
WATER-JEL TECHNOLOGIES, INC.
By: /s/ Werner Haase
Werner Haase
Chief Executive Officer
Date: July 12, 1996
4
<PAGE>
JOURNEYCRAFT, INC. AND AFFILIATE
REPORT ON AUDITS OF COMBINED FINANCIAL STATEMENTS
TWO YEARS ENDED AUGUST 31, 1995
CONTENTS
Page
Independent auditors' report F-1
Combined balance sheets F-2
Combined statements of income F-3
Combined statement of stockholders' equity F-4
Combined statements of cash flows F-5
Notes to combined financial statements F - 6 - F-12
<PAGE>
Independent Auditors' Report
Stockholders
Journeycraft, Inc. and Affiliate
New York, New York
We have audited the accompanying combined balance sheets of Journeycraft, Inc.
and Affiliate as of August 31, 1995 and 1994 and the related combined statements
of income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Journeycraft, Inc. and
Affiliate as of August 31, 1995 and 1994, and the results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles.
As discussed in Note 11, subsequent to year end the Company merged with
Water-Jel Technologies, Inc. Further, as discussed in Note 2 to the financial
statements, the Company changed its method of accounting for certain investments
in equity securities.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
June 28, 1996 (except for Note 11, as
to which the date is July 2, 1996)
F-1
<PAGE>
JOURNEYCRAFT, INC. AND AFFILIATE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31,
--------------------- February 29,
1995 1994 1996
---- ---- ----
ASSETS (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,552,297 $ 2,322,947 $ 3,934,314
Accounts receivable 1,174,029 915,330 1,087,805
Deferred income taxes (Note 7) 54,000 107,250 -
Prepaid expenses and other
current assets 160,962 - 161,443
----------- ----------- -----------
Total current assets 5,941,288 3,345,527 5,183,562
PROPERTY AND EQUIPMENT, net (Note 3) 721,814 767,097 742,646
INVESTMENT IN MARKETABLE SECURITIES - 146,042 -
INVESTMENT IN MARKETABLE SECURITIES,
at fair value (Note 2) 294,311 - 370,520
DEFERRED INCOME TAXES (Note 7) 589,000 576,000 597,870
DUE FROM STOCKHOLDER (Note 4) 1,297,483 1,273,014 1,247,483
NOTE RECEIVABLE (Note 5) 155,000 - 155,000
OTHER ASSETS (Note 6) 168,641 111,518 190,105
----------- ----------- -----------
$ 9,167,537 $ 6,219,198 $ 8,487,186
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,659,685 $ 1,166,862 $ 1,687,743
Notes payable, bank - 675,000 -
Income taxes payable, current 1,051,149 170,505 1,026,837
Customer billings in excess of program costs 2,664,431 1,846,182 2,002,353
Accrued lease obligation (Note 8) 160,000 318,000 -
Other current liabilities 34,448 66,014 28,799
----------- ----------- -----------
Total current liabilities 5,569,713 4,242,563 4,745,732
----------- ----------- -----------
LONG-TERM ACCRUED LEASE OBLIGATION (Note 8) 760,000 691,000 778,000
----------- ----------- -----------
INTEREST OF MINORITY STOCKHOLDER 179,236 95,755 236,384
----------- ----------- -----------
COMMITMENTS (Note 8)
STOCKHOLDERS' EQUITY (Note 9):
Common stock, no par value; 200 shares
authorized, issued and outstanding
158.65,100, and 158.65, respectively 244,000 19,000 244,000
Common stock, no par value; 200 shares
authorized, issued and outstanding 20,
20 and 30, respectively 1,000 1,000 1,000
Additional paid-in capital 48,882 225,000 48,882
Unrealized gain on investments reported
at fair value 75,960 - 36,120
Retained earnings 2,288,746 944,880 2,397,068
----------- ----------- -----------
Total stockholders' equity 2,658,588 1,189,880 2,727,070
----------- ----------- -----------
$ 9,167,537 $ 6,219,198 $ 8,487,186
=========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements
F-2
<PAGE>
JOURNEYCRAFT, INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended
Years Ended August 31, ----------------------------
---------------------- February 29, February 28,
1995 1994 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Program revenues $ 27,946,825 $ 27,456,133 $ 19,150,210 $ 11,380,239
Airline commission revenues 10,539,398 8,989,152 5,147,889 4,793,896
------------- ------------ ------------ ------------
38,486,223 36,445,285 24,298,099 16,174,135
------------- ------------ ------------ ------------
OPERATING EXPENSES:
Direct program costs 22,902,666 22,869,359 16,134,384 9,122,407
Selling and promotion expenses 8,337,392 8,152,764 4,729,207 3,960,491
General and administrative expenses 4,715,811 5,335,368 3,273,986 2,455,713
Loss on investment impairment (Note 10) - 808,433 - -
------------- ------------ ------------ ------------
35,955,869 37,165,924 24,137,577 15,538,611
------------- ------------ ------------ ------------
OPERATING INCOME (LOSS) 2,530,354 (720,639) 160,522 635,524
------------- ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest and dividend income 65,428 20,854 90,112 17,003
Interest expense (107,553) (89,773) (47,472) (69,186)
Gain on sale of investments - 253,171 124,594 -
Other, net - 119,220 38,713 -
------------- ------------ ------------ ------------
(42,125) 303,472 205,947 (52,183)
------------- ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES,
CUMULATIVE EFFECT CHANGE AND
MINORITY INTEREST 2,488,229 (417,167) 366,469 583,341
PROVISION (BENEFIT) FOR INCOME TAXES
(Note 7) 1,159,000 (30,000) 201,000 300,000
--------- ------- ------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
CHANGE AND MINORITY INTEREST 1,329,229 (387,167) 165,469 283,341
CUMULATIVE EFFECT FOR CHANGE IN
ACCOUNTING PRINCIPLE (Note 7) - 553,500 - -
------------- ------------ ------------ ------------
INCOME BEFORE MINORITY INTEREST 1,329,229 166,333 165,469 283,341
MINORITY INTEREST IN INCOME (LOSS) (14,637) 53,916 57,147 (31,442)
------------- ------------ ------------ ------------
NET INCOME $ 1,343,866 $ 112,417 $ 108,322 $ 314,783
============= ============ ============ ============
INCOME (LOSS) PER COMMON SHARE (Note 9):
Income before cumulative effect of change in
accounting principle and minority interest $ 7,046.00 $ (2,217.58) $ 877.13 $ 1,501.94
Cumulative effect for change in accounting
principle - 3,170.28 - -
Minority interest in income (loss) 77.59 (308.81) (302.93) 166.67
------------- ------------ ------------ ------------
Net income $ 7,123.59 $ 643.89 $ 574.20 $ 1,668.61
============= ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND EQUIVALENTS OUTSTANDING
(Note 9) 188.65 174.59 188.65 188.65
====== ====== ====== ======
</TABLE>
See accompanying notes to combined financial statements
F-3
<PAGE>
JOURNEYCRAFT, INC. AND AFFILIATE
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Shares
-------------------------
Common, Common, Additional
No Par No Par Paid-in Unrealized Retained
Journeycraft Thermacom Stated At Capital Gain Earnings Total
------------ --------- --------- ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 1, 1993 100.00 20 20,000 $ 125,000 $ - $ 832,463 $ 977,463
Issuance of options/rights for
services (Note 9) - - - 100,000 - - 100,000
Net income - - - - - 112,417 112,417
------- --- ---------- ---------- --------- ------------ ----------
Balance, August 31, 1994 100.00 20 20,000 225,000 - 944,880 1,189,880
Transfer of shares in subsidiary
to minority shareholder (Note 9) - - - 48,882 - - 48,882
Exercise of options/rights (Note 9) 58.65 - 225,000 (225,000) - - -
Unrealized holding gain on available
for sale securities - - - - 75,960 - 75,960
Net income - - - - - 1,343,866 1,343,866
------- --- ---------- ---------- --------- ------------ ----------
Balance, August 31, 1995 158.65 20 245,000 48,882 75,960 2,288,746 2,658,588
Exercise of options/rights
(unaudited) (Note 9) - 10 - - - - -
Unrealized holding loss on available
for sale securities (unaudited) - - - - (39,840) - (39,840)
Net earnings (unaudited) - - - - - 108,322 108,322
------- --- ---------- ---------- --------- ------------ ----------
Balance, February 29, 1996
(unaudited) 158.65 30 $ 245,000 $ 48,882 $ 36,120 $ 2,397,068 $ 2,727,070
======= === ========== ========== ========= ============ ===========
</TABLE>
See accompanying notes to combined financial statements
F-4
<PAGE>
JOURNEYCRAFT, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Years Ended August 31, --------------------------
---------------------- February 29, February 28,
1995 1994 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,343,865 $ 112,417 $ 108,322 $ 314,783
----------- --------- ------------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
(Gain) loss on sale of marketable securities - (253,171) (124,594) -
Contributed services - 100,000 - -
Depreciation and amortization 177,934 167,867 76,804 65,442
Deferred income tax (benefit) provision (22,000) (130,000) 86,000 (19,000)
Minority interest in income (loss) (14,637) 53,916 57,147 (31,442)
Cumulative affect of change in accounting principle - (553,500) - -
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (258,699) 73,847 86,224 118,626
Prepaid expenses and other current assets (160,962) 466,297 (481) 11,098
Other assets (57,123) 711,857 (21,464) 8,724
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 639,823 681,617 28,058 670,750
Income taxes payable 880,894 80,531 (31,561) 376,555
Customer billings in excess of program costs 818,249 (901,038) (662,078) 243,703
Accrued lease liability (89,000) 98,000 (142,000) (26,000)
Other current liabilities (31,566) 66,014 (5,649) (46,453)
----------- --------- ------------- -----------
Total adjustments 1,882,913 662,237 (653,594) 1,372,003
----------- --------- ------------- -----------
Net cash provided by (used in) operating activities 3,226,778 774,654 (545,272) 1,686,786
----------- --------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in marketable securities (16,294) - (191,669) -
Proceeds from sale of marketable securities 5,985 746,875 166,594 -
Advances (repayments) from shareholders (24,469) (493,136) 50,000 -
Increase in notes receivable (155,000) - - -
Acquisition of property and equipment (132,650) (200,110) (97,636) (19,819)
----------- --------- ------------- -----------
Net cash provided by (used in) investing activities (322,428) 53,629 (72,711) (19,819)
----------- --------- ------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of notes payable - 675,000 - -
Repayment of notes payable (675,000) (837,015) - (675,000)
----------- --------- ------------- -----------
Net cash provided by (used in) financing activities (675,000) (162,015) - (675,000)
----------- --------- ------------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,229,350 666,268 (617,983) 991,967
CASH AND CASH EQUIVALENTS, beginning of period 2,322,947 1,656,679 4,552,297 2,322,947
----------- --------- ------------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 4,552,297 $ 2,322,947 $ 3,934,314 $ 3,314,914
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Interest paid $ 107,553 $ 89,773 $ 47,472 $ 69,186
=========== =========== =========== ===========
Income taxes paid $ 327,207 $ 19,684 $ 115,131 $ -
=========== =========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements
F-5
<PAGE>
JOURNEYCRAFT, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
TWO YEARS ENDED AUGUST 31, 1995 AND SIX MONTHS ENDED
FEBRUARY 29, 1996 (UNAUDITED) AND FEBRUARY 28, 1995 (UNAUDITED)
1. Summary of Significant Accounting Policies:
a. Description of business
Journeycraft, Inc. and Affiliate (the "Company") provides
retail corporate travel related services, including reservations,
ticketing and travel management for major U.S. corporations. The Company also
organizes and operates meeting and group incentive programs for corporations
and medical professionals.
b. Principles of combination
The combined financial statements include the accounts of the
following:
<TABLE>
<S> <C>
Journeycraft, Inc. ("Journeycraft")
Journeycorp Travel Management Inc. ("Journeycorp") Wholly-owned subsidiary
X-Ceed Motivation, Inc. ("X-Ceed") Wholly-owned subsidiary
X-Ceed Motivation Atlanta, Inc. ("X-Ceed Atlanta") Majority-owned subsidiary
Theracom Communications, Inc. ("Theracom") Affiliate under common control
</TABLE>
Upon combination, all significant intercompany accounts and
transactions are eliminated.
c. Revenue recognition
Revenue from retail travel services is recognized upon the ticketing
of the related flights. The Company bills clients in advance for group meeting
and incentive programs and records such deposits on the balance sheet, as
customer billings in excess of program costs. The Company recognizes revenue,
net of the related costs, when the travel and or program has commenced.
d. Investment in marketable securities
The Company has adopted Financial Accounting Standards Board ("FASB")
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." FASB No. 115 requires that investments in debt and equity
securities be designated as trading, held-to maturity, or available for sale.
Management considers the Company's marketable securities to be
available-for-sale and are reported at amounts which approximate fair value.
e. Depreciation and amortization
Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Amortization of leasehold
improvements is computed using the straight-line method over the estimated
useful lives of the related assets or the remaining term of the lease, whichever
is shorter. Maintenance and repairs of property and equipment are charged to
operations and major improvements are capitalized. Upon retirement, sale or
other disposition of property and equipment, the cost and accumulated
depreciation are eliminated from the accounts and gain or loss is included in
operations.
F-6
<PAGE>
1. Summary of Significant Accounting Policies: (Cont'd)
f. Income taxes
In February 1992, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards Statement No. 109,
"Accounting for Income Taxes." FASB No. 109 requires a company to recognize
deferred tax assets and liabilities for the expected future income tax
consequences of events that have been recognized in the financial statements.
Under this method, deferred tax assets and liabilities are determined based on
temporary differences between the financial statements carrying amounts and tax
bases of assets and liabilities using enacted tax rates in effect in the years
in which the temporary differences are expected to reverse. The Company adopted
FASB No. 109 in the year ended August 31, 1994. Under FASB No. 109, the Company
recorded a significant deferred tax asset that could not be recognized under
prior accounting rules.
g. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
h. Concentration of risk
The Company invests its excess cash in deposits and money market
accounts with major financial institutions and in commercial paper of companies
with strong credit ratings. Generally, the investments mature within ninety days
and therefore, are subject to little risk.
i. Statement of cash flows
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
j. Interim financial statements
The unaudited financial statements reflects all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for the period. The
results of operations are not necessarily indicative of the results expected for
the fiscal year.
2. Investment in Marketable Securities:
On September 1, 1994, the Company adopted SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities".
At August 31, 1995, marketable equity securities, which are classified as
available for sale securities, are valued at the fair value of the securities
and the unrealized gain on the securities, net of income taxes, are reflected in
stockholders' equity. During the year ended August 31, 1995, unrealized gain
(net of income taxes of $61,950) on available for sale securities amounted to
$75,960.
F-7
<PAGE>
2. Investment in Marketable Securities: (Cont'd)
Below is a summary of the unrealized gain net of income taxes from
available for sale securities:
Balance, September 1, 1994 $ -
Cumulative effect of change in accounting principle
to reflect marketable equity securities available
for sale at their fair value as of August 31, 1994 34,104
Unrealized gain in fair value of available for sale
securities for the year ended August 31, 1995 41,856
---------
Balance, August 31, 1995 $ 75,960
=========
3. Property and Equipment:
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
August 31,
--------------------- February 29,
1995 1994 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Machinery and equipment $ 495,788 $ 601,417 $ 549,903
Furniture and fixtures 279,033 246,489 300,138
Software 159,913 144,913 172,426
Leasehold improvements 311,625 295,167 321,528
------------- ------------- --------------
1,246,359 1,287,986 1,343,995
Less accumulated depreciation
and amortization 524,545 520,889 601,349
------------- ------------- --------------
$ 721,814 $ 767,097 $ 742,646
============= ============= =============
</TABLE>
4. Due from Stockholder:
Due from stockholder represents a loan to the Company's majority
stockholder/officer. Principal is payable in five equal installments, with the
first installment due in March 1997. Commencing March 1, 1996, the loan bears
interest at 8%, prior to that date, the loan was non-interest bearing.
5. Note Receivable:
Note receivable consists of a note due from an officer of X-Ceed
Atlanta. The note bears interest at 3% and is due on October 12, 2000.
6. Other Assets:
Other assets at August 31, 1995 and 1994 include approximately $111,000
and $43,000, respectively, of cash surrender value of life insurance policies,
net of outstanding loans.
F-8
<PAGE>
7. Income Taxes:
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
Years Ended Six Months Ended
August 31, -------------------------------
--------------------- February 29, February 28,
1995 1994 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current:
Federal $ 749,000 $ 63,000 $ 73,000 $ 207,000
State 432,000 37,000 42,000 112,000
------------- ------------ ----------- -----------
1,181,000 100,000 115,000 319,000
------------- ------------ ----------- -----------
Deferred:
Federal (14,000) (82,000) 54,000 (12,000)
State (8,000) (48,000) 32,000 (7,000)
------------- ------------ ----------- -----------
(22,000) (130,000) 86,000 (19,000)
------------- ------------ ----------- -----------
$ 1,159,000 $ (30,000) $ 201,000 $ 300,000
============= ============ =========== ===========
</TABLE>
The Company has capital loss carryovers of approximately $390,000 which
can be used to reduce future taxable capital gains through 2000. Under Section
383 of the Internal Revenue Code of 1986, should there occur a greater than 50%
"ownership change" of a company, the ability of the Company to utilize the
available loss carryforwards would be restricted to a prescribed annual amount.
The July 1996 merger (see Note 11) meets the criteria of Section 382.
Accordingly, future utilization of the loss carryforwards will be subject to
limitation.
The net deferred tax amounts included in the financial statements consist
of the following:
<TABLE>
<CAPTION>
August 31,
--------------------- February 29,
1995 1994 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Capital loss carryovers $ 176,000 $ 176,000 $ 119,000
Amortization 56,000 60,000 50,000
Impairment of investment 169,000 169,000 169,000
Non-cash compensation 137,000 75,000 158,000
Accrued lease obligation 414,000 454,000 351,000
Other 52,000 41,000 52,000
------------- ------------ ------------
1,004,000 975,000 899,000
Deferred tax liabilities:
Unrealized gain on
marketable securities (62,000) - (28,000)
Valuation allowance for
deferred tax assets (299,000) (292,000) (273,000)
------------- ------------ ------------
Net deferred income taxes $ 643,000 $ 683,000 $ 598,000
============= ============ ============
</TABLE>
F-9
<PAGE>
7. Income Taxes: (Cont'd)
The Company's effective tax rate for the years ended 1995 and 1994 on
earnings differs from the Federal Statutory regular tax rate as follows:
Years Ended
August 31,
---------------------
1995 1994
---- ----
Federal tax expense at
statutory rate 34.0% (34.0)%
State income tax expense 11.2 (1.7)
Other 1.1 18.1
Deferred taxes:
Valuation allowance .3 10.4
---- ----
46.6% (7.2)%
==== ====
The Company adopted FASB No. 109 in the year ended August 31, 1994.
Recognition of the deferred tax asset provided a cumulative effect increase to
income of $553,500.
8. Commitments:
a. Lease commitment
The Company conducts its operations from leased space in various
locations throughout the United States. These leases (classified as operating
leases) expire at various dates through June 2008. Management expects that in
the normal course of business these leases will be renewed or replaced by other
leases.
As of August 31, 1995, future net minimum rental payments (net of
sublease income) under operating leases having initial or remaining
non-cancelable terms in excess of one year are as follows:
Years Ending
August 31,
1996 $ 761,000
1997 603,000
1998 580,000
1999 567,000
2000 565,000
Thereafter 4,636,000
-------------
$ 7,712,000
=============
Rental expense approximated $865,000 and $933,000 for the years
ended August 31, 1995 and 1994, respectively, and $452,000 and $435,000 for
the six months ended February 29, 1996 and February 28, 1995, respectively.
The Company recognizes rent expense on its leases on a straight-line
basis. The excess of rent expense on a straight-line basis over the rental
payments made, is recorded as an accrued liability.
F-10
<PAGE>
8. Commitments: (Cont'd)
b. Retirement plan
The Company maintains a retirement plan which is a salary reduction
plan under Section 401(k) of the Internal Revenue Code. Participation in the
plan is voluntary, and any participant may elect to contribute up to 15% of
their earnings The Company will match 10% of the first 6% of the employee's
contribution. Company contributions approximated $7,000 and $11,000 for the
years ended August 31, 1995 and 1994, respectively, and $8,000 and $4,000 for
the six months ended February 29, 1996 and February 28, 1995, respectively.
9. Stockholders' Equity:
a. Capitalization
The authorized capital of both Journeycraft and Theracom consist of
200 shares of common stock with no par value.
b. Stock options/rights
In October 1993, Theracom granted a consultant an option to
acquire 10 shares of Theracom common stock at an exercise price of $.10 per
share. This option was exercised in January 1996.
In March 1994, the Company granted a consultant a right to acquire
26.65 shares of common stock for consulting services provided. The value of this
right ($100,000) was charged to operations in the year ended August 31, 1994.
The consultant exercised the right in April 1995.
In April 1995, the Company issued 32 shares of common stock in
connection with the exercise of an option issued in prior years as
consideration for consulting services.
c. Stock bonus
An employment agreement with an officer/shareholder of X-Ceed Atlanta
provided for the issuance of up to 25 shares (25%) of X-Ceed Atlanta common
stock if certain earnings levels were attained. The officer/shareholder earned 9
and 16 shares in the twelve month periods ended March 31, 1996 and 1995,
respectively. The subsidiary recorded compensation expense related to this stock
bonus of $138,000 and $67,000 for the years ended August 31, 1995 and 1994,
respectively, and $45,000 and $80,000 for the six months ended February 29, 1996
and February 28, 1995, respectively.
The additional shares earned by the officer/shareholder were
transferred/will be transferred from Journeycraft's stockholdings. The excess of
the fair value of the shares transferred over their book value has/will be
recorded as equity adjustment.
d. Income (loss) per share
Income (loss) per share were computed by dividing income (loss) by
the weighted average number of shares of common stock outstanding during each
period presented. The weighted average number of shares was computed as follows:
F-11
<PAGE>
9. Stockholders' Equity: (Cont'd)
d. Income (loss) per share (Cont'd)
<TABLE>
<CAPTION>
Years Ended Six Months Ended
August 31, -----------------------------
------------------ February 29, February 28,
1995 1994 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Journeycraft:
Weighted shares outstanding 122.00 100.00 158.65 100.00
Common stock equivalents 36.65 44.59 - 58.65
Theracom:
Weighted shares outstanding 20.00 20.00 22.50 20.00
Common stock equivalents 10.00 10.00 7.50 10.00
----- ----- ---- -----
188.65 174.59 188.65 188.65
====== ====== ====== ======
</TABLE>
10. Loss on Investment Impairment:
Loss on investment impairment for the year ended August 31, 1994
represents travel and incentive business joint ventures that were abandoned.
11. Subsequent Event:
On July 2, 1996, the Company was acquired by Water-Jel Technologies, Inc.
("Water-Jel"), and approximately 3,500,000 shares of Water Jel's common stock
were issued in exchange for all of the outstanding shares of the Company and its
affiliate. The merger will be accounted for as a pooling of interests.
F-12
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
UNAUDITED PROFORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial
statements give effect to the Merger of Water-Jel Technologies, Inc. ("WJT") and
JourneyCraft, Inc. and Affiliate ("JC") under the "pooling of interests" method
of accounting. These pro forma financial statements are presented for
illustrative purposes only, and therefore are not necessarily indicative of the
operating results and financial position that might have been achieved had the
Merger occurred as of an earlier date, nor are they necessarily indicative of
operating results and financial position which may occur in the future.
A pro forma condensed combined balance sheet is provided as of February
29, 1996, giving effect to the Merger as though it had been consummated on that
date. The pro forma condensed combined balance sheet combines the balance sheets
of WJT and JC as of February 29, 1996. The pro forma condensed combined
statements of income are provided combining WJT and JC for the six month periods
ended February 29, 1996 and February 28, 1995, and the years ended August 31,
1995 and 1994, giving effect to the Merger as though it had occurred at the
beginning of the earliest period presented.
The historical condensed statements of income for annual periods
presented are derived from the separate historical financial statements of WJT
and combined financial statements of JC, and should be read in conjunction with
the companies' separate financial statements. The historical financial
statements as of or for the six months ended February 29, 1996 and February 28,
1995 are derived from the historical interim financial statements of WJT and
combined interim financial statements of JC, and have been prepared in
accordance with generally accepted accounting principles applicable to interim
financial information and, in the opinion of WJT's and JC's respective
managements, include all adjustments necessary for a fair presentation of
financial information for such interim periods.
F-13
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FEBRUARY 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------------------- -----------------------------
Water-Jel
Technologies Journeycraft
Inc. Inc. Adjustments Combined
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
-------
Current assets:
Cash and cash equivalents $ 3,319,029 $ 3,934,314 $ - $ 7,253,343
Accounts receivable, net 522,840 1,087,805 - 1,610,645
Inventories 1,135,030 - - 1,135,030
Prepaid expenses and other current assets 702,288 161,443 - 863,731
Deferred income taxes 136,000 - - 136,000
----------- ----------- -------- ------------
Total current assets 5,815,187 5,183,562 - 10,998,749
Property and equipment, net 957,120 742,646 - 1,699,766
Intangible assets, net 125,568 - - 125,568
Investment in marketable securities, at
fair value 947,494 370,520 - 1,318,014
Deferred income taxes 225,983 597,870 - 823,853
Due from stockholder - 1,247,483 - 1,247,483
Note receivable - 155,000 - 155,000
Other assets 231,320 190,105 - 421,425
----------- ----------- -------- ------------
$ 8,302,672 $ 8,487,186 $ - $ 16,789,858
=========== =========== ======== ============
</TABLE>
F-14
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FEBRUARY 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------- ------------------------------
Water-Jel
Technologies Journeycraft
Inc. Inc. Adjustments Combined
---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrued expenses $ 331,529 $1,687,743 $ - $ 2,019,272
Income taxes payable-current - 1,026,837 - 1,026,837
Customer billings in excess of program costs - 2,002,353 - 2,002,353
Other current liabilities 39,200 28,799 - 67,999
---------- ---------- ------------- ------------
Total current liabilities 370,729 4,745,732 - 5,116,461
---------- ---------- ------------- ------------
Long-term debt 110,300 778,000 - 888,300
---------- ---------- ------------- ------------
Interest of minority stockholder - 236,384 - 236,384
---------- ---------- ------------- ------------
Stockholders' equity:
Common stock, no par value, 200 shares
authorized, issued and outstanding 158.65 - 244,000 (244,000)2(i) -
Common stock, no par value, 200 shares
authorized, issuedandoutstanding 30 - 1,000 (1,000)2(i) -
Common stock, $.08 par value; authorized
12, 500,000 shares; 3,499,180 and
6,999,180 issued and outstanding, respectively 279,934 - 280,000 2(i) 559,934
Preferred stock, $.08 par value, authorized
125,000 shares; -0- issued
and outstanding - - - -
Additional paid-in capital 9,633,335 48,882 (48,882)2(ii)
13,882 2(ii) 9,647,217
Unrealized gain on investments reported
at fair value 324,628 36,120 360,748
Retained earnings (deficit) (2,416,254) 2,397,068 - (19,186)
---------- ---------- ------------- ------------
Total stockholders' equity 7,821,643 2,727,070 - 10,548,713
---------- ---------- ------------- ------------
$8,302,672 $8,487,186 $ - $16,789,858
========== ========== ============= ===========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements
F-15
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------- --------------------------
WATER-JEL JOURNEYCRAFT
TECHNOLOGIES INC.
INC. AND AFFILLIATE ADJUSTMENTS COMBINED
------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $1,930,367 $24,298,099 $ - $26,228,466
Operating expenses 1,917,566 24,137,577 - 26,055,143
---------- ----------- --- -----------
Operating income 12,801 160,522 - 173,323
Other income 346,716 205,947 552,663
---------- ----------- --- -----------
Income before provision for income
taxes and minority interest 359,517 366,469 725,986
Provision for income taxes 70,000 201,000 271,000
---------- ----------- --- -----------
Income before minority interest 289,517 165,469 - 454,986
Minority interest in earnings - 57,147 - 57,147
---------- ----------- --- -----------
Net Income $ 289,517 $ 108,322 $ - $ 397,839
---------- ----------- --- -----------
---------- ----------- --- -----------
Income per common share
Primary $ 0.08 $ 574.20 $ 0.06
---------- ----------- -----------
---------- ----------- -----------
Assuming full dilution $ 0.08 $ 574.20 $ 0.06
---------- ----------- -----------
---------- ----------- -----------
Weighted average number of shares
outstanding
Primary 3,547,716 188.65 7,047,716
---------- ----------- -----------
---------- ----------- -----------
Assuming full dilution 3,623,005 188.65 7,123,005
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See accompanying notes to pro forma condensed combined financial statements
F-16
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1995
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------ ---------------------------
Water-Jel Journeycraft
Technologies Inc.
Inc. and Affiliate Adjustments Combined
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 2,377,445 $ 16,174,135 $ -- $ 18,551,580
Operating expenses 2,242,780 15,538,611 -- 17,781,391
----------- ------------ ---------- ------------
Operating income 134,665 635,524 -- 770,189
Other income (expense) 65,877 (52,183) -- 13,694
----------- ------------ ---------- ------------
Income before provision for income taxes and
Minority interest 200,542 583,341 -- 783,883
Provision for income taxes - 300,000 -- 300,000
----------- ------------ ---------- ------------
Income before Minority interest 200,542 283,341 -- 483,883
Minority interest in (loss) - (31,442) -- (31,442)
----------- ------------ ---------- ------------
Net Income $ 200,542 $ 314,783 $ -- $ 515,325
=========== ============ ========== ============
Income per common share
Primary $ 0.06 $ 1,668 61 $ 0.07
=========== ============ ============
Assuming full dilution $ 0.06 $ 1,668 61 $ 0.07
=========== ============ ============
Weighted average number of shares outstanding
Primary 3,499,199 188.65 6,999,199
=========== ============ ============
Assuming full dilution 3,499,199 188.65 6,999,199
=========== ============ ============
</TABLE>
See accompanying notes to pro forma condensed combined financial statements
F-17
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------ ----------------------------
Water-Jel Journeycraft
Technologies Inc.
Inc. and Affiliate Adjustments Combined
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 5,029,217 $ 38,486,223 $ - $ 43,515,440
Operating expenses 4,864,312 35,955,869 - 40,820,181
----------- ------------- ----------- ------------
Operating income 164,905 2,530,354 - 2,695,259
Other income (expense) 150,596 (42,125) - 108,471
----------- ------------- ----------- ------------
Income before provision (benefit) for income
taxes and minority interest 315,501 2,488,229 - 2,803,730
Provision (benefit) for income taxes (471,875) 1,159,000 - 687,125
----------- ------------- ----------- ------------
Income before minority interest 787,376 1,329,229 - 2,116,605
Minority interest in (loss) - (14,637) - (14,637)
----------- ------------- ----------- ------------
Net Income $ 787,376 $ 1,343,866 $ - $ 2,131,242
=========== ============= =========== ============
Income per common share
Primary $ 0.22 $ 7,123.59 $ 0.30
=========== ============= ============
Assuming full dilution $ 0.22 $ 7,123.59 $ 0.30
=========== ============= ============
Weighted average number of shares outstanding
Primary 3,547,716 188.65 7,047,716
=========== ============= ============
Assuming full dilution 3,623,005 188.65 7,123,005
=========== ============= ============
</TABLE>
See accompanying notes to pro forma condensed combined financial statements
F-18
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------------- -------------------------
Water-Jel Journeycraft
Technologies Inc.
Inc. and Affiliate Adjustments Combined
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Revenues $ 4,887,591 $ 36,445,285 $ - $ 41,332,876
Operating expenses 4,468,899 37,165,925 - 41,634,824
----------- ------------ ------ ------------
Operating income (loss) 418,692 (720,640) - (301,948)
Other income 707,155 303,472 - 1,010,627
----------- ------------ ------ ------------
Income (loss) before provision for
income taxes minority interest 1,125,847 (417,168) - 708,679
Benefit for income taxes (115,000) (30,000) - (145,000)
----------- ------------ ------ ------------
Income (loss) before minority interest 1,240,847 (387,168) - 853,679
Minority interest in earnings (loss) - 53,916 - 53,916
----------- ------------ ------ ------------
Income before cumulative effect for change
accounting principle $ 1,240,847 $ (441,084) $ - $ 799,763
=========== ============ ====== ============
Income per common share
Primary $ 0.35 $ (2,526.40) $ 0.11
=========== ============ ============
Assuming full dilution $ 0.35 $ (2,526.40) $ 0.11
=========== ============ ============
Weighted average number of shares outstanding
Primary 3,498,857 174.59 6,998,857
=========== ============ ============
Assuming full dilution 3,498,857 174.59 6,998,857
=========== ============ ============
</TABLE>
See accompanying notes to pro forma condensed combined financial statements
F-19
<PAGE>
WATER-JEL TECHNOLOGIES, INC.
AND
JOURNEYCRAFT, INC. AND AFFILIATE
NOTES TO UNAUDITED PROFORMA
COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation:
The unaudited pro forma condensed combined financial statements are
presented for illustrative purposes only, giving effect to the Merger of
Water-Jel Technologies, Inc. ("WJT") and JourneyCraft, Inc. and Affiliate ("JC")
as accounted for by the "pooling of interests" method. In accordance with the
Commission reporting rules, the pro forma combined statements of income, and the
historical statements from which they are derived, present only income from
continuing operations and, therefore do not include discontinued operations,
extraordinary items, and the cumulative effects of accounting changes.
2. Pro Forma Adjustments:
Stockholders' equity
Stockholders' equity as of February 29, 1996 has been adjusted to
reflect the following:
(i) Common Stock, $.08 par value, has been adjusted to reflect the
assumed issuance of approximately 3,500,000 shares of Water-Jel Technologies,
Inc. Common Stock, $.08 per value, in exchange for 158.65 and 30 shares of
JourneyCraft, Inc. and Theracom, Inc. (Affiliate), respectively, Common Stock
issued and outstanding as of February 29, 1996, utilizing the exchange rate of
18,552.8757 shares of WJT for each share of JC.
(ii) Additional paid-in capital of JC is adjusted for the effects of
the aforementioned issuance of approximately 3,500,000 shares of WJT Common
Stock having a par value of $.08 per share in exchange for JC Common Stock.
Pro Forma Condensed Combined Statements of Income
a. Earnings per common share
Pro Forma weighted average number of common shares outstanding for
the six month periods ended February 29, 1996 and February 28, 1995 are based
upon WJT's and JC's combined historical weighted average shares, after
adjustment of JC's historical number of shares by the Conversion Number.
F-20
<PAGE>
b. The pro forma condensed combined statements of income do not give
effect to transaction costs of the Merger and nonrecurring costs expected to be
incurred in connection with the integration of the companies' business and
operations. These costs will be charged to operations.
F-21
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 17, 1996 by
and among
WATER-JEL TECHNOLOGIES, INC., a New York corporation ("WJI"),
JOURNEYCRAFT, INC., a New York corporation ("JCI"),
THERACOM, INC., a New York corporation ("THI"),
JCI ACQUISITION CORPORATION, a New York corporation and wholly owned subsidiary
of WJI ("JCI Subsidiary"),
THI ACQUISITION CORPORATION, a New York corporation and wholly owned subsidiary
of WJI ("THI Subsidiary"), and
WERNER HAASE, having an office c/o JCI ("Haase" or the "Shareholder").
WJI, JCI Subsidiary, THI Subsidiary, JCI and THI are each sometimes referred to
herein as a "Constituent Corporation" or collectively as the "Constituent
Corporations." JCI is sometimes referred to herein as the "Surviving
Corporation." JCI Subsidiary and THI Subsidiary are hereinafter sometimes
referred to collectively as the "Subsidiaries" and individually (and sometimes
also collectively) as "Subsidiary." Haase is a major shareholder of JCI and THI.
WITNESSETH THAT:
WHEREAS, the Boards of Directors of the Constituent Corporations have
each determined that it is in the best interest of each Constituent Corporation
and its respective stockholders to consummate a merger in the manner set forth
herein; and
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the parties hereby agree as follows:
I. Definitions
For purposes of this Agreement, the following terms shall have the
following meanings:
1
<PAGE>
A. "JCI Common Stock" shall mean the common stock of JCI. "THI
Common Stock" shall mean the common stock of THI.
B. "Effective Date" or "Closing Date" shall mean the effective
date of the Merger, which shall be the date and time of filing of the
articles of merger required to be filed hereunder.
C. "WJI Common Stock" shall mean the common stock of WJI.
D. "Merger" shall mean collectively the merger of JCI Subsidiary with
and into JCI and the merger of THI Subsidiary into THI, and in
consideration for which the stockholders of JCI and THI will receive
certain shares of WJI Common Stock in accordance with the terms of this
Agreement.
E. "Subsidiary's Common Stock" as to each Subsidiary shall mean
the common stock of such Subsidiary.
F. "Surviving Corporations" shall mean JCI and THI, the
corporations that survive the Merger.
G. "Affiliate" means any person that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is
under common control with, any such person.
II. Merger
A. Surviving Corporation. Upon the due approval and adoption of this
Agreement by the stockholders of each of the Constituent Corporations
other than WJI and the satisfaction or waiver of the conditions set
forth herein to the obligations of the parties hereto, articles of
merger shall be filed with the Secretary of State of the State of New
York in accordance with the laws of such State. Effective as of the
close of business on the date on which the articles of merger are
filed, (1) JCI Subsidiary shall merge with and into JCI, and JCI as the
Surviving Corporation shall continue its corporate existence under the
laws of the State of New York, and (2) THI Subsidiary shall merge with
and into THI, and THI as the Surviving Corporation shall continue its
corporate existence under the laws of the State of New York. The date
and time of such filings is herein referred to as the "Effective Date"
or the "Closing Date."
B. Further Documentation. From time to time as and when
requested by the Surviving Corporations or WJI or their
2
<PAGE>
successors or assigns, WJI, JCI, THI and Subsidiaries and their proper
(or former) officers and directors, shall execute and deliver, or cause
to be executed and delivered, all deeds and other instruments and shall
take or cause to be taken all such other and further actions as the
Surviving Corporations or WJI may deem necessary or appropriate in
order to more fully vest in the Surviving Corporation title to and
possession of all of the rights, privileges, powers, immunities,
purposes and franchises of JCI, THI and the Subsidiaries and to
carry-out the intent and purposes of this Agreement.
III. Closing. Concurrently with the filing of the articles of merger the parties
shall execute and deliver to and among themselves the Closing Documents (as
hereinafter defined) at a closing (the "Closing") to occur at the offices of
Oscar D. Folger, 521 Fifth Avenue, New York, New York 10175 on the Closing Date.
The term "Closing Documents" means the agreements, instruments and documents
which are contemplated by this Agreement to be executed and delivered by the
parties on the Closing Date.
IV. Certificate of Incorporation, By-laws, Directors and Officers
A. Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporations in effect on the Effective
Date shall be the Certificate of Incorporation of the Surviving
Corporation until amended as provided by law.
B. By-Laws. The by-laws of the respective Surviving
Corporations in effect on the Effective Date shall be the by-laws of
the Surviving Corporations until amended or repealed as provided by
law.
C. Directors and Officers of JCI and THI. The initial directors
of the Surviving Corporations shall be Haase and two designees of
Haase, and shall hold office as provided in the by-laws of the
Surviving Corporation. The officers of each Surviving Corporation on
the Effective Date shall be Haase, who shall be President, CEO and
Treasurer, and Nurit Kahane who shall be Executive Vice President, and
shall hold office as provided in the by-laws of the Surviving
Corporations.
D. Directors of WJI. Effective upon the Closing, the directors
of WJI shall be Haase, Norman Doctoroff and a designee of Haase subject
to any restrictions in Section 14(f) of the Securities Exchange Act of
1934. Each such person shall hold office as provided in the by-laws of
WJI as
3
<PAGE>
amended pursuant to this Agreement.
V. Conversion and Exchange of Shares
A. Conversion of Shares. The manner and basis of converting the
shares of each Constituent Corporation shall be as follows:
1. Upon consummation of the Merger, all 100 shares of
JCI Subsidiary Common Stock outstanding immediately
prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the
holder thereof, be converted into and exchanged for
all of the issued and outstanding shares of capital
stock of JCI. All such 100 shares have been fully
paid and are non-assessable, and were issued for an
aggregate capital contribution of $10. Upon
consummation of the Merger, all 100 shares of THI
Subsidiary Common Stock outstanding immediately prior
to the Effective Date shall, by virtue of the Merger
and without any action on the part of the holder
thereof, be converted into and exchanged for all of
the issued and outstanding shares of capital stock of
THI. All such 100 shares have been fully paid and
are non-assessable, and were issued for an aggregate
capital contribution of $10.
2. The shares of JCI Common Stock and THI Common Stock
which shall be outstanding immediately prior to the
Effective Date shall, by virtue of the Merger and
without any action on the part of the holder thereof,
be converted as of the Effective Date into the
immediate right to receive in the aggregate 3,500,000
shares of WJI Common Stock, with the portion thereof
to be allocated to the JCI Common Stock and the THI
Common Stock, respectively, to be as to be designated
by JCI and THI to WJI not less than three business
days prior to the Closing. The shares of WJI to be
issued as aforesaid are referred to herein as the
"Transaction Shares."
3. The Transaction Shares shall not upon issuance be
registered under the Securities Act of 1933, as
amended (the "Act"). WJI has no obligation to
register the Transaction Shares.
4. Each holder of record on the Effective Date of
4
<PAGE>
shares of JCI Common Stock or THI Common Stock (the
"JCI-THI shareholders") shall be entitled, upon the
surrender to WJI of the certificate for his shares of
JCI Common Stock or his THI Common stock for
cancellation, to receive a certificate or
certificates representing a portion of the total
number of Transaction Shares which is proportional to
the portion of the Transaction Shares being issued
for all JCI common stock and all THI common stock,
respectively.
B. No Change in WJI Shares.
Except for the issuance of shares of WJI Common
Stock upon conversion of shares of JCI Common Stock and THI
Common Stock pursuant to this Agreement, the Merger shall
effect no change in the shares of WJI Common Stock and none of
WJI's shares shall be converted as a result of the Merger.
VI. Certain Other Agreements
A. JCI and THI covenant that as of the Effective Date there will be
outstanding only the shares of JCI Common Stock and THI common stock
which are disclosed in the Disclosure Schedule, and that there will not
be outstanding any options, warrants or similar instruments or
agreements or arrangements for the issuance of any additional shares of
capital stock of such party.
B. Upon the effectiveness of the Merger, WJI and Target Capital Corp.
("Target") shall enter into a consulting agreement, which agreement
shall replace a current agreement between WJI and the sole shareholder
of Target and on the same terms and conditions and for the balance of
the term thereof, except that Target shall perform services thereunder
only as a consultant and on a non full-time basis and except also that
the term of this Agreement shall be extended for three years if during
the period commencing on the date hereof and ending June 30, 1997 WJI
shall have obtained at least $4,000,000 in equity capital from one or
more sources (including, without limitation, funds obtained from the
exercise of currently outstanding warrants).
C. On the Effective Date WJI will enter into a five-year employment
agreement with Nurit Kahane at an annual salary of $250,000.
5
<PAGE>
D. By notice to the other parties given on or before June 15, 1996,
each party may update, amend and supplement its Disclosure Schedule
hereunder, effective as if such update, amendment or supplement had
been made as of the date of this Agreement or on such other date as is
set forth in such notice.
E. Peter Cohen's salary shall from and after the Effecrive Date accrue
at the rate of $175,000 per annum.
VII. Representations and Warranties of JCI, THI and Haase.
Subject to the limitations on joint and several liability set forth in
Section 16(d), JCI, THI and Haase jointly and severally represent and warrant to
WJI and the Subsidiaries with respect to each of JCI and THI (each of JCI and
THI being sometimes referred to in this Section as "Corporation")that, except as
set forth in the disclosure schedule which was executed and delivered by JCI to
WJI on the date hereof (for each such Corporation, the "Corporation Disclosure
Schedule") with a reference to the relevant Section of this Agreement:
A. Organization and Capitalization. Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York. All of the issued and outstanding shares of Common
Stock are duly authorized, validly issued, fully paid and
nonassessable; and there are no other equity securities of any class
authorized, issued, reserved for issuance or outstanding, and there are
no preemptive rights as to any shares. There are no outstanding
options, warrants, agreements or rights to subscribe for or to
purchase, or commitments to issue, shares of Corporation capital stock.
Except as set forth on the Corporation Disclosure Schedule, Corporation
does not own, directly or indirectly, any outstanding capital stock or
securities convertible into capital stock of any other corporation or
any participating interest in any partnership, joint venture or other
business enterprise. All subsidiaries and the directors and officers of
each subsidiary are listed on the Corporation Disclosure Schedule.
B. Power and Authority. Corporation has all requisite power and
authority to own, lease and operate its properties and to conduct its
businesses as presently conducted and as proposed to be conducted and
is duly qualified or licensed as a foreign corporation in good standing
in each jurisdiction in which the failure to qualify would have a
material adverse effect upon the business or properties of Corporation.
All
6
<PAGE>
such jurisdictions are listed in the Corporation Disclosure
Schedule.
C. Certificate of Incorporation and By-Laws of Corporation. The copies
of the Certificate of Incorporation of Corporation, certified by the
Secretary of State of New York and the bylaws of Corporation, certified
by its Secretary, heretofore delivered to WJI, are true, complete and
correct.
D. Authority for Agreement. The Board of Directors and the shareholders
of Corporation have approved this Agreement, has authorized the
execution and delivery hereof, recommended (or will recommend
reasonably in advance of the stockholders meeting), the adoption and
approval of this Agreement to such corporation's stockholders, and has
directed that this Agreement be submitted to such stockholders for
adoption and approval at a special meeting of such stockholders or by
the written unanimous consent of such stockholders to be obtained
without a meeting. Corporation has full power, authority and legal
right to enter into this Agreement and, upon appropriate vote of its
stockholders in accordance with law, to consummate the transactions
contemplated hereby.
E. No Violation to Result. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby:
1. are not in violation or breach of, do not conflict
with or constitute a material default under, and will
not accelerate or permit the acceleration of the
performance required by, any of the terms of the
charter documents or by-laws of Corporation or (after
the consents referred to in the Corporation
Disclosure Schedule are obtained) any note, debt
instrument, security agreement or mortgage, or any
other contract or agreement, written or oral, to
which Corporation or its shareholders is a party or
by which Corporation or any of such shareholders or
any of their respective properties or assets are
bound;
2. will not be an event which, after notice or lapse of
time or both, will result in any such violation,
breach, conflict, default, or acceleration;
3. will not result in a violation under any law,
7
<PAGE>
judgment, decree, order, rule, regulation or other
legal requirement of any governmental authority,
court or arbitration tribunal whether federal, state,
provincial, municipal or local (within the U.S. or
otherwise) at law or in equity, and applicable to
Corporation or any of its shareholders; and
4. will not result in the creation or imposition of any
lien, encumbrance, security agreement, equity,
option, claim, charge, pledge or restriction in favor
of any third person upon any of the properties or
assets of Corporation
F. No Existing Defaults. Corporation is not in default in any
material respect:
1. under any of the terms of any note, debt instrument,
security agreement or mortgage or under any other
commitment, contract, agreement, license, lease or
other instrument, whether written or oral, to which
Corporation is a party or by which it or any of its
properties or assets are bound;
2. under any law, judgment, decree, order, rule
regulation or other legal requirement or any
governmental authority, court or arbitration tribunal
whether federal, state, provincial, municipal or
local (within the U.S. or otherwise), at law or in
equity, and applicable to Corporation or to any of
its properties or assets; or
3. in the payment of any of monetary obligations or
debts.
There exists no condition or event which, after notice or lapse of
time or both, would constitute a material default in connection with any of the
foregoing.
G. Financial Statements.
The unaudited financial statements of Corporation as of and
for the period ended December 31, 1995 and 1995 (which financial
statements, including, without limitation, any notes thereto and
reports thereon are hereinafter collectively called the "Corporation
Financial Statements," and which financial statements for the year
ended December
8
<PAGE>
31, 1995 are hereinafter referred to as the "Corporation
1995 Financial Statements"), all of which have been delivered to WJI
and are included in the Corporation Disclosure the Corporation
Disclosure Schedule fairly present the financial position of
Corporation and the results of operations as of the respective dates
and for the periods indicated thereon and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis. Corporation does not have any material liability or
obligation not reflected in the 1994 balance sheet included in the
Corporation 1995 Financial Statements, and all provisions, reserves and
allowances provided for therein are adequate, except for liabilities or
obligations incurred between December 31, 1995 and the date of this
Agreement in the ordinary and usual course of business consistent with
the representations and warranties set forth herein and that would not
have been in conflict with said representation if they had been
incurred between the date hereof and the Effective Date. Corporation
does not have any material contingent liability or obligation except as
set forth in the Corporation Disclosure Schedule.
1. No Adverse Changes. From December 31, 1995 to the
date of this Agreement, except as disclosed on the
Corporation Disclosure Schedule, and except as
otherwise permitted herein:
2. Corporation has not sustained any damage, destruction
or loss, by reason of fire, explosion, earthquake,
casualty, labor trouble, requisition or taking of
property by any government or agency thereof,
windstorm, embargo, riot, act of God or the public
enemy, flood, volcanic eruption, accident, other
calamity or other similar or dissimilar event
(whether or not covered by insurance) materially
adversely affecting the business, properties,
financial condition or operations of Corporation; and
3. there have been no changes in the condition
(financial or otherwise), business, net worth,
assets, properties, liabilities or obligations
(fixed, contingent, known, unknown or otherwise) of
Corporation which in the aggregate have had or may
have a material adverse effect on the business,
properties, financial condition or operations of
Corporation, and there has been no occurrence,
circumstance or combination thereof
9
<PAGE>
which is reasonably expected to result in any such
material adverse effect before or after the Effective
Date.
H. Employee Plans and Agreements. Corporation does not have any
employee benefit plans other than existing health insurance, vacation
and other plans which are set forth in the Corporation Disclosure
Schedule. Corporation has no pension or profit sharing plan.
I. Full Disclosure. The information furnished by Corporation or
by any its directors or officers to WJI or Subsidiary pursuant to this
Agreement (whether furnished prior to, at, or subsequent to the date
hereof), the information contained in the Exhibits and the Corporation
Disclosure Schedule, in this
Agreement, and the other information furnished to WJI or Subsidiary by
Corporation, or by any of its directors or officers at any time prior
to the Effective Date (pursuant to the request of WJI or Subsidiary or
otherwise), does not and will not contain any untrue statement of a
material fact and does not and will not omit to state any material fact
necessary to make all such information not misleading.
J. Taxes. Corporation has prepared (or caused to be prepared) and
timely and properly filed (or caused to be timely and properly filed)
with the appropriate federal, state, provincial, municipal or local
authorities (within the U.S. or otherwise) all tax returns, information
returns and other reports required to be filed and has paid or accrued
(or caused to be so paid or accrued) in full all taxes, interest,
penalties, assessments or deficiencies, if any, due to, or claimed to
be due by, any taxing authority. The balance sheets included in the
Corporation 1995 Financial Statements include appropriate provisions
for all taxes, interest, penalties, assessments or deficiencies, if
any, for the periods indicated thereon to the extent not theretofore
paid. Corporation has not executed or filed with any taxing authority
any agreement extending the period for assessment or collection of any
taxes. Corporation is not a party to any pending action or proceeding,
nor, to its knowledge, is any such action or proceeding threatened, by
any governmental authority for the assessment or collection of taxes,
and no claim for assessment or collection of taxes has been asserted
against Corporation, and during the course of any audit currently in
process or not completed, no issues have been suggested by any
representative of any such governmental authority that, if asserted,
would result in a proposed
10
<PAGE>
assessment of taxes, interest or penalties,
against Corporation which would have a materially adverse effect on
Corporation.
K. Pending Transactions. The Corporation Disclosure Schedule sets forth
a list of all pending transactions (whether or not Corporation is
legally bound to enter therein) which are out of the ordinary course of
business and would involve the expenditure or commitment of in excess
of $50,000. WJI acknowledges that Corporation has numerous commitments
for the purchase and sale of inventory which exceed $50,000 but are in
the ordinary course of business.
L. Intellectual Property. The Corporation Disclosure Schedule contains
a true and complete list of all trademarks, certification marks, trade
names, service marks, copyrights, patents, patent applications and
product composition formulae owned or used by Corporation. Corporation
owns or possesses adequate licenses or other rights to use all
trademarks, certification marks, trade names, service marks,
copyrights, patents, patent applications, trade secrets, product
composition formulae, computer programs, product development records
and other proprietary processes and information used in its business,
and the same are sufficient in all material respects to conduct the
business as currently conducted and as proposed to be conducted. Except
as described in the Corporation Disclosure Schedule, Corporation is not
required to pay any royalty, license fee or similar type of
compensation in connection with the conduct of its business as it is
now or heretofore has been conducted or as proposed to be conducted.
All patents, patent applications and rights to inventions or
discoveries (whether or not patentable) owned or held by any officer,
director, stockholder, employee, consultant or agent of Corporation and
relating to and its business have been duly and effectively transferred
to Corporation: and, except as described on the Corporation Disclosure
Schedule, the operations of Corporation do not infringe, and no one has
asserted that such operations do infringe, the patents, patent
applications, trademarks, certifications marks, trade names, service
marks, trade secrets or other intellectual property rights of anyone.
M. Machinery and Equipment. Corporation owns or has adequate rights to
all machinery and equipment (including, without limitation, machinery
and equipment under development or construction) used or necessary for
use in its trade or business, and all such material machinery and
equipment is in substantially good operating condition, free and clear
of any
11
<PAGE>
material liens, claims or encumbrances.
N. Brokers. Corporation has not expressly or impliedly engaged
any broker, finder, investment banker, or agent with respect to this
Agreement or any transaction contemplated hereby, or agreed to pay any
fee to any such person or entity.
O. Contracts. The Corporation Disclosure Schedule contains a
true and complete list of each contract or agreement outside of the
ordinary course of business which require aggregate payments by
Corporation, or receipt by Corporation, of, in excess of $100,000, and
to which Corporation is a party, or by which Corporation is bound, in
any respect.
P. Litigation. Except as set forth in the Corporation Disclosure
Schedule, there is no material litigation, suit, proceeding, action,
claim or (to the knowledge of Corporation) investigation, at law or in
equity, pending or (to the knowledge of Corporation) threatened against
or affecting Corporation or involving any of its property or assets,
before any court, agency, authority or arbitration tribunal, including,
without limitation, any product liability, workers' compensation or
wrongful dismissal claims, or claims, actions, suits or proceedings
relating to toxic materials, hazardous substances, pollution or the
environment. There are no facts which, if known to customers,
governmental authorities or other persons, might result in any such
litigation, suit, proceeding, action, claim or investigation. Except as
set forth in the Corporation Disclosure Schedule, Corporation is not
subject to or in default with respect to any notice, order, writ,
injunction or decree of any court, agency, authority or arbitration
tribunal.
Q. Compliance with Laws. Corporation has complied with all
laws, municipal by-laws, regulations, rules, orders, judgments, decrees
and other requirements and policies imposed by any governmental
authority applicable to it, its properties or the operation of its
business.
R. Employee Compensation and Agreements with Affiliates. The
Corporation Disclosure Schedule contains a true and complete list of
all employees of Corporation earning or receiving more than $30,000
annually from Corporation. Except as set forth and described on the
Corporation Disclosure, neither Haase nor any other officer of
Corporation has, either directly or indirectly:
12
<PAGE>
1. an interest in any corporation, partnership,
proprietorship, association or other person or entity
which furnishes or sells those services or products
which are furnished to or sold by Corporation; or
2. a beneficial interest in any contract or agreement to
which Corporation is a party or by which Corporation
or its properties are bound.
S. Bank Accounts. The Corporation Disclosure Schedule contains
a true and complete list of (i) all accounts of Corporation with any
bank, trust company or other deposit taking institution, together with
the names of the persons authorized to draw thereon, and (ii) the names
of all persons holding powers of attorney from Corporation and a
summary statement of the terms thereof.
T. True Copies. All documents furnished or caused to be
furnished to WJI or Subsidiary by Corporation are true and correct
copies, and there are no amendments or modifications thereto except as
set forth in such documents.
U. No Impending Adverse Facts. Neither Corporation nor Haase is
aware of any proposed reduction or termination of any business
relationship which is material to the assets, finances, prospects or
business of JCI.
V. Survival of Representations and Warranties; Notice of
Changes.
1. The representations and warranties of Corporation and
Haase made in this Agreement, including the
representations as to Corporation, are correct, true
and complete as of the date hereof in all material
respects and will be correct, true and complete as at
the Effective Date with the same force and effect as
though such representations and warranties had been
made at the Effective Date, and shall survive the
Effective Date for six months.
2. Corporation and Haase shall give to WJI prompt
written notice of any fact or circumstance which
would render incorrect the representation and
warranty in Section (i).
13
<PAGE>
VIII. Representations and Warranties of WJI and the Subsidiary.
A. WJI and Subsidiary jointly and severally represent and warrant to
JCI and THI that, except as set forth in the disclosure schedule which
was executed and delivered by WJI and Subsidiary to JCI on the date
hereof (the "WJI Disclosure Schedule") with a reference to the relevant
Section of this Agreement:
B. Reports and Financial Statements.
1. WJI has previously furnished the Company with true
and complete copies of its (i) Annual Report on Form
10-KSB for the year ended August 31, 1995, as filed
with the Securities & Exchange Commission (the
"Commission" or "SEC"), (ii) Quarterly Report on Form
10-QSB filed for the fiscal quarter ended February
29, 1996 (the "WJI Quarterly Reports"), and (iii)
proxy statements relating to the most recent meeting
of its stockholders, and (iv) all Form 8-K's filed by
WJI with the Commission from and after August 31,
1995. The financial statements included in such
reports were prepared in accordance with generally
accepted accounting principles, consistently applied,
and present fairly the financial position and the
results of operations of WJI for the periods
indicated.
a) WJI does not have any liabilities, whether
or not accrued, contingent or otherwise,
that individually or in the aggregate, are
reasonably likely to have a material adverse
effect on the financial condition, business,
assets or prospects (financial or otherwise)
on WJI other than liabilities disclosed in
its SEC filings, or for which WJI has made
adequate reserves as reflected in its
financial statements.
b) Since the date of such financial statements,
there has been no material adverse change in
the financial condition, business, assets,
or prospects (financial or otherwise) of
WJI.
c) Since April 30, 1993, WJI has filed (i) all
forms, reports, statements and other
documents required to be filed with (A) all
annual reports on Form 10-K, (2) all
14
<PAGE>
quarterly reports on Form 10-Q, (3) all
proxy statements relating to meetings of
stockholders (whether annual or special),
(4) all current reports on Form 8-K and (5)
all other reports, schedules, registration
statements or other documents (collectively
referred to as the "Company SEC Reports"),
and (B) any other applicable state
securities authorities and (ii) all forms,
reports, statements and other documents
required to be filed with any other
applicable federal or state regulatory
authorities, including, without limitation,
state insurance and health regulatory
authorities, except where the failure to
file any such forms, reports, statements or
other documents would not be reasonably
likely to have a material adverse effect on
the financial condition, business, assets
or prospects (financial or otherwise) of
WJI (all such forms, reports statements and
other documents in clauses (i) and (ii) of
this Section being referred to herein,
collectively, as the "Company Reports")
The Company Reports (i) were prepared in
all material respects in accordance with
the requirements of applicable law
(including, with respect to the Company SEC
Reports, the Securities Act or the Exchange
Act, as the case may be) and (ii) did not
at the time they were filed contain any
untrue statement of a material fact or omit
to state a material fact required to be
stated therein or necessary in order to
make the statements therein, in the light
of the circumstances under which they were
made, not misleading.
2. As of their respective dates, such reports,
statements and other written materials did not
contain any untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary to make the statements therein,
in light of the circumstances under which they were
made, not misleading.
3. The audited consolidated financial statements and any
unaudited interim financial statements of WJI
included in such reports have been prepared in
accordance with generally accepted accounting
principles applied on a consistent basis and fairly
present the financial position of WJI and
15
<PAGE>
its subsidiaries as at the dates thereof and the
results of their operations and changes in financial
position for the periods then ended, except as
indicated therein or in the notes thereto.
C. Organization and Capitalization of WJI. WJI is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York. All of the issued and outstanding shares of WJI are
duly authorized, validly issued, fully paid and nonassessable; and
there are no other equity securities of any class of WJI authorized,
issued, reserved for issuance or outstanding; and there are no
preemptive rights as to any shares. Except as described on the WJI
Disclosure Schedule, there are no outstanding options, warrants,
agreements or rights to subscribe for or to purchase, or commitments to
issue, shares of WJI Common Stock.
D. Organization and Capitalization of WJI Subsidiary. Each Subsidiary
is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York with an authorized capital
consisting solely of 200 shares Common Stock ("Subsidiary's Common
Stock"), of which 100 shares are issued and outstanding; all of such
100 issued and outstanding shares of such Subsidiary's Common Stock are
duly authorized, validly issued, fully paid and nonassessable; and
there are no other equity securities of any class of such Subsidiary
authorized, issued, reserved for issuance or outstanding. There are no
outstanding options, warrants, agreements or rights to subscribe for or
to purchase, or commitments to issue, shares of any Subsidiary's Common
Stock. All securities offered or sold by WJI since its inception either
were offered and sold pursuant to an effective registration under the
Securities Act of 1933, as amended, and any applicable state securities
laws or were exempt from registration under such acts and laws.
E. Stock of Subsidiaries. WJI owns or prior to the Effective
date will own 100 shares of each Subsidiary's Common Stock, which
shares represent all of the issued and outstanding shares of such
Subsidiary.
F. Power and Authority. The Board of Directors of WJI, and the Board of
Directors of each Subsidiary have approved this Agreement. Each of WJI
and each Subsidiary has all requisite power and authority to own, lease
and operate its properties and to conduct its business as presently
conducted
16
<PAGE>
and as proposed to be conducted and is duly qualified or licensed
as a foreign corporation in good standing in each jurisdiction in
which the failure to qualify would have a material adverse effect on
the business or properties of WJI.. All such jurisdictions are listed
in the WJI Disclosure Schedule.
G. Certificate of Incorporation and By-Laws of WJI and Certificate of
Incorporation and By-Laws of each Subsidiary. The copies of the
Certificate of Incorporation and Certificate of Incorporation of WJI
and each Subsidiary, each certified by the Secretary of State of the
State of New York, and the By-Laws of WJI and each Subsidiary,
certified by their respective Secretaries, heretofore delivered by WJI
and each Subsidiary to JCI, are true, complete and correct.
H. Authority for Agreement. The Board of Directors of each of
WJI and each Subsidiary has approved this Agreement and has authorized
the execution and delivery hereof. WJI and each Subsidiary each has
full power, authority and legal right to enter into this Agreement and
to consummate the transactions contemplated hereby.
I. No Violation to Result. Except as set forth in the WJI
Disclosure Schedule, the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby:
1. are not in violation or breach of, do not conflict
with or constitute a material default under, and will
not accelerate or permit the acceleration of the
performance required by, any of the terms of the
charter documents or by-laws of WJI or Subsidiary or
(after the consents referred to in the WJI Disclosure
Schedule are obtained) any note, debt instrument,
security agreement or mortgage, or any other contract
or agreement, written or oral, to which WJI or
Subsidiary is a party or by which WJI or Subsidiary
or any of their properties or assets are bound;
2. will not be an event which, after notice or lapse of
time or both, will result in any such violation,
breach, conflict, default, or acceleration;
3. will not result in violation under any law, judgment,
decree, order, rule, regulation or other
17
<PAGE>
legal requirement of any governmental authority,
court or arbitration tribunal whether federal, state,
provincial, municipal or local (within the U.S. or
otherwise) at law or in equity, and applicable to WJI
or Subsidiary; and
4. will not result in the creation or imposition of any
lien, possibility of lien, encumbrance, security
agreement, equity, option, claim, charge, pledge or
restriction in favor of any third person upon any of
the properties or assets of WJI or Subsidiary.
J. No Existing Defaults. Except as set forth in the WJI
Disclosure Schedule, WJI and Subsidiary are not in material default in
any material respect:
1. under any of the terms of any note, debt instrument,
security agreement or mortgage or under any other
commitment, contract, agreement, license, lease or
other instrument, whether written or oral, to which
it is a party or by which it or any of its properties
or assets is bound;
2. under any law, judgment, decree, order, rule,
regulation or other legal requirement or any
governmental authority, court or arbitration tribunal
whether federal, state, provincial, municipal or
local (within the U.S. or otherwise), at law or in
equity, and applicable to it or to any of its
properties or assets; or
3. in the payment of any of its monetary obligations or
debts.
4. There exists no condition or event which, after
notice or lapse of time or both, would constitute a
default in connection with any of the foregoing.
K. WJI and Subsidiary Employee Plans and Agreements. WJI does
not have any employee benefit plan other than its existing health
insurance package which includes life insurance, group long-term
disability, and vacations.
L. Full Disclosure. The information furnished by WJI and
Subsidiary, or by any of the directors or officers of WJI or Subsidiary
to JCI pursuant to this Agreement (whether
18
<PAGE>
furnished prior to, at, or subsequent to the date hereof), the
information contained in the Exhibits and the WJI Disclosure Schedule
referred to in this Agreement, and the other information furnished to
JCI by WJI or Subsidiary, or by any of the directors or officers of WJI
or Subsidiary at any time prior to the Effective Date (pursuant to the
request of JCI otherwise), does not and will not contain any untrue
statement of a material fact and does not and will not omit to state
any material fact necessary to make all such information not
misleading.
M. Taxes. WJI and Subsidiary have each prepared (or caused to be
prepared) and timely and properly filed (or caused to be timely and
properly filed) with the appropriate federal, state, provincial,
municipal or local authorities (within the U.S. or otherwise) all tax
returns, information returns and other reports required to be filed and
have paid or accrued (or caused to be so paid or accrued) in full all
taxes, interest, penalties, assessments or deficiencies, if any, due
to, or claimed to be due by, any taxing authority. The balance sheets
included in the WJI 1995 Financial Statements include appropriate
provisions for all such taxes, interest, penalties, assessments or
deficiencies, if any, for the periods indicated thereon to the extent
not theretofore paid. Neither WJI nor Subsidiary has executed or filed
with any taxing authority any agreement extending the period for
assessment or collection of any taxes. Neither WJI nor Subsidiary is a
party to any pending action or proceeding, nor, to its knowledge, is
any such action or proceeding threatened, by any governmental authority
for the assessment or collection of taxes, and no claim for assessment
or collection of taxes has been asserted against WJI or Subsidiary, and
during the course of any audit currently in process or not completed,
no issues have been suggested by any representative of any such
governmental authority that, if asserted, would result in a proposed
assessment of taxes, interest or penalties, against WJI or Subsidiary
which may have a material adverse effect on WJI.
N. Pending Transactions. The WJI Disclosure Schedule sets forth
a list of all pending transactions (whether or not WJI is legally bound
to enter therein) which are out of the ordinary course of business and
would involve the expenditure or commitment of in excess of $50,000.
O. Intellectual Property. The WJI Disclosure Schedule contains a true
and complete list of all trademarks, certification marks, trade names,
service marks, copyrights,
19
<PAGE>
patents, patent applications and product composition formulae owned or
used by WJI and Subsidiary. WJI and Subsidiary own or possess adequate
licenses or other rights to use all trademarks, certification marks,
trade names, service marks, copyrights, patents, patent applications,
trade secrets, product composition formulae, computer programs, product
development records and other proprietary processes and information
used in its business, and the same are sufficient in all material
respects to conduct the business as now conducted or as proposed to be
conducted. Except as described in the WJI Disclosure Schedule, neither
WJI nor Subsidiary is required to pay any royalty, license fee or
similar type of compensation in connection with the conduct of its
business as it is now or heretofore has been conducted. All patents,
patent applications and rights to inventions or discoveries (whether or
not patentable) owned or held by any officer, director, stockholder,
employee, consultant or agent of WJI or Subsidiary and relating to its
business in any manner have been duly and effectively transferred to
WJI or Subsidiary; and, except as described on the WJI Disclosure
Schedule, the operations of WJI and Subsidiary do not infringe, and no
one has asserted that such operations do infringe, the patents, patent
applications, trademarks, certifications marks, trade names, service
marks, trade secrets or other intellectual property rights of anyone.
P. Machinery and Equipment. WJI or Subsidiary owns or has adequate
rights to all machinery and equipment (including, without limitation,
machinery and equipment under development or construction) used or
necessary for use in its trade or business, and all such material
machinery and equipment is in substantially good operating condition,
free and clear of any material liens, claims or encumbrances.
Q. Brokers. Neither WJI nor Subsidiary has expressly or
impliedly engaged any broker, finder, investment banker, or agent with
respect to this Agreement or any transaction contemplated hereby, or
agreed to pay any fee to any such person or entity.
R. Contracts. The WJI Disclosure Schedule contains a true and
complete list of each contract or agreement, requiring aggregate
payments by WJI or Subsidiary, or receipts by WJI or Subsidiary, in
excess of $100,000, to which WJI or Subsidiary is a party, or by which
WJI or Subsidiary is bound, in any respect.
20
<PAGE>
S. Litigation. Except as set forth in the WJI Disclosure Schedule,
there is no material litigation, suit, proceeding, action, claim or (to
the knowledge of WJI) investigation, at law or in equity, pending or
(to the knowledge of WJI) threatened against or affecting WJI or
Subsidiary or involving any of their property or assets, before any
court, agency, authority or arbitration tribunal, including, without
limitation, any product liability, workers' compensation or wrongful
dismissal claims, or claims, actions, suits or proceedings relating to
toxic materials, hazardous substances, pollution or the environment.
There are no facts which, if known to customers, governmental
authorities or other persons, might result in any such litigation,
suit, proceeding, action, claim or investigation. Except as set forth
in the WJI Disclosure Schedule, neither WJI nor Subsidiary is subject
to or in default with respect to any notice, order, writ, injunction or
decree of any court, agency, authority or arbitration tribunal.
T. Compliance with Laws. WJI and Subsidiary have each complied with
all laws, municipal by-laws, regulations, rules, orders, judgments,
decrees and other requirements and policies imposed by any governmental
authority applicable to it, its properties or the operation of its
business.
U. Licenses, Permits and Approvals. WJI and Subsidiary each have all
material licenses, permits, approvals, qualifications or the like,
issued or to be issued to WJI and Subsidiary by any government or any
governmental unit, agency, body or instrumentality, whether federal,
state, provincial, municipal or local (within the U.S. or otherwise)
necessary for the conduct of its trade or business, and all such items
are in full force and effect, and are listed in the WJI Disclosure
Schedule.
1. Employee Compensation and Agreements with Affiliates.
The WJI Disclosure Schedule contains a true and
complete list of all employees of WJI and Subsidiary
earning or receiving more than $60,000 annually from
WJI. Except as set forth and described on the WJI
Disclosure Schedule, no directors or officers and no
employees listed thereon nor any Affiliate of any
such person has, either directly or indirectly:
2. an interest in any corporation, partnership,
proprietorship, association or other person or entity
which furnishes or sells those services or
21
<PAGE>
products which are furnished to or sold by WJI or
Subsidiary; or
3. a beneficial interest in any contract or agreement to
which WJI or Subsidiary is a party or by which WJI
or Subsidiary or it properties are bound.
V. Bank Accounts. The WJI Disclosure Schedulecontains a true
and complete list of (i) all accounts of WJI with any bank, trust
company or other deposit taking institution, together with the names of
the persons authorized to draw thereon, and (ii) the names of all
persons holding powers of attorney from WJI and a summary statement of
the terms thereof.
W. True Copies. All documents furnished or caused to be
furnished to JCI by WJI or Subsidiary are true and correct copies, and
there are no amendments or modifications thereto except as set forth in
such documents.
X. Survival of Representations and Warranties; Notice of
Changes.
1. The representations and warranties of each of WJI and
Subsidiary made in this Agreement are correct, true
and complete as of the date hereof and will be
correct, true and complete as at the Effective Date
with the same force and effect as though such
representations and warranties had been made at the
Effective Date, and shall survive the Effective Date
for six months.
2. WJI shall give to JCI prompt written notice of any
fact or circumstance which would render incorrect the
representation and warranty made by WJI in Section
(i).
IX. Conduct and Transactions Prior to Closing and Certain Agreements
A. Access to Properties and Records.
Each Constituent Corporation shall afford to the officers,
employees, attorneys, accountants and other authorized representatives
of the other, free and full access to all of its assets, properties,
books and records, in order to afford each Constituent Corporation as
full an opportunity of review, examination and investigation as it
shall desire
22
<PAGE>
to make of the affairs of the other, and each shall be permitted to
make extracts from, or take copies of, such books, records (including
the stock record and minute books) or other documentation or to obtain
temporary possession of any thereof as may be reasonably necessary; and
each shall furnish or cause to be furnished to the other such
reasonable financial and operating data and other information about its
business, properties and assets which any of such Constituent
Corporation's respective officers, employees, attorneys, accountants or
other authorized representatives may request.
B. Interim Covenants of each Constituent Corporation. From the date of
this Agreement until the Effective Date, except to the extent expressly
permitted by this Agreement or otherwise consented to by an instrument
in writing signed by each other Constituent Corporation or as otherwise
set forth in the WJI Disclosure Schedule or the JCI Disclosure
Schedule, each Constituent Corporation shall conduct its operations
only in the ordinary course, narrowly construed, and it shall not make
any change in its constituent documents, i.e., Certificate of
Incorporation or by-laws.
C. Information. Each party will furnish to the other all
information concerning the other which is reasonably required for
inclusion in any filing with any governmental or regulatory body in
connection with the transactions contemplated by this Merger Agreement
or otherwise required by law.
D. Notice of Breach.
1. WJI and Subsidiary will immediately give notice to
JCI of the occurrence of any event or the failure of
any event to occur that results in a breach of any
representation or warranty by WJI and Subsidiary or a
failure by WJI and Subsidiary to comply with any
covenant, condition or agreement contained herein.
2. JCI will immediately give notice to WJI and
Subsidiary of the occurrence of any event or the
failure of any event to occur that results in a
breach of any representation or warranty by JCI or a
failure by JCI to comply with any covenant, condition
or agreement contained herein.
E. Representations. WJI, Subsidiary, JCI, THI and Haase (a)
will take all action necessary to render accurate as of
23
<PAGE>
the Effective Date their respective representations and warranties
contained herein, (b) will refrain from taking any action which would
render any such representation or warranty inaccurate in any material
respect as of such time, and (c) will perform or cause to be satisfied
each covenant or condition to be performed or satisfied by them.
F. Negotiations with Third Parties. The Constituent Corporations will
not, without the prior written approval of the others, furnish any
information to, or initiate or participate in discussions or
negotiations with, third parties relating to any merger, sale or other
disposition of any substantial part of its assets or stock or any other
sale by stockholders of such Constituent Corporations of any of their
shares of its Common Stock.
X. Conditions to WJI and Subsidiary Obligations
All obligations of WJI and Subsidiary under this Agreement are subject
to the fulfillment and satisfaction, prior to or at the time at which the
Effective Date is scheduled to occur, of each of the following conditions, any
one or more of which may be waived by WJI and Subsidiary.
A. Representations and Warranties True at the Effective Date. At the
Effective Date, the representations and warranties of JCI and Haase set
forth in this Agreement will be true and correct in all material
respects at and as of such time, and at the Effective Date JCI shall
have delivered to WJI and Subsidiary a certificate to such effect
signed by the President and the Chief Financial Officer of JCI.
B. Performance. Each of the obligations of JCI to be performed by it
on or before the Effective Date pursuant to the terms of this Agreement
shall have been duly performed in all material respects at the
Effective Date, and at the Effective Date JCI shall have delivered to
WJI and Subsidiary a certificate to such effect signed by its President
and Chief Financial Officer.
C. Authority. All action required to be taken by, or on the part of,
JCI to authorize the execution, delivery and performance of this
Agreement by JCI and the consummation of the transactions contemplated
hereby shall have been duly and validly taken by its Board of Directors
and stockholders.
D. Opinion of Counsel. WJI and Subsidiary shall have been
24
<PAGE>
furnished an opinion or opinions of Blau, Kramer, Wactlar & Lieberman,
P.C., counsel to JCI, dated the date of the Effective Date, in form and
substance reasonably satisfactory to WJI and Subsidiary.
E. Fairness Opinion. WJI shall have been furnished the opinion
of independent investment bankers that the transactions contemplated
hereby are fair to the shareholders of WJI from a financial point of
view.
F. Due Diligence Satisfactory. The results of WJI's due
diligence investigations of JCI and THI shall be reasonably
satisfactory to WJI.
G. Changes in the Disclosure Schedule Satisfactory. Any changes
made in JCI's and THI's Disclosure Schedule shall be satisfactory to
WJI.
XI. Conditions to Obligations of JCI
All obligations of JCI under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the time at which the Effective
Date is scheduled to occur, of each of the following conditions, any one or more
of which may be waived by JCI.
A. Representations and Warranties True at the Effective Date. At the
Effective Date, the representations and warranties by WJI set forth in
this Agreement will be true and correct in all material respects at and
as of such time, and at the Effective Date, WJI and Subsidiary shall
have delivered to JCI a certificate to such effect signed by the
President and the Chief Financial Officer of WJI and Subsidiary.
B. WJI and Subsidiary's Performance. Each of the obligations of WJI and
Subsidiary to be performed by it on or before the Effective Date
pursuant to the terms of this Agreement shall have been duly performed
in all material respects at the Effective Date, and at the Effective
Date WJI and Subsidiary shall have delivered to JCI a certificate to
such effect signed by the President and the Chief Financial Officer of
WJI and Subsidiary.
C. Authority. All action required to be taken by, or on the
part of, WJI and Subsidiary to authorize the execution, delivery and
performance of this Agreement by WJI and the consummation of the
transactions contemplated hereby shall have been duly and validly taken
by the Board of Directors of
25
<PAGE>
each of WJI and Subsidiary.
D. Opinion of Counsel of WJI and Subsidiary. JCI shall have
been furnished an opinion or opinions of Oscar D. Folger, Esq., counsel
to WJI and Subsidiary, dated the Effective Date, in form and substance
reasonably satisfactory to JCI.
E. Tax-Free Assurance. JCI shall have received reasonable
assurances, including an opinion of tax counsel, regarding the tax-free
nature of the transactions contemplated hereby.
F. Fairness Opinion. WJI shall have been furnished the opinion
of independent investment bankers that the transactions contemplated
hereby are fair to the shareholders of WJI from a financial point of
view.
G. Due Diligence Satisfactory. The results of JCI's and THI's due
diligence investigations of WJI shall be reasonably satisfactory to JCI
and THI.
H. Shareholder Approval. The shareholders of JCI and THI shall have
approved this Agreement and the transactions contemplated thereby.
I. Changes in the Disclosure Schedule Satisfactory. Any changes made in
WJI's Disclosure Schedule shall be satisfactory to JCI and THI.
XII. Best Efforts
Each party shall use its best efforts to cause all conditions to the
Closing to be fulfilled as soon as possible.
XIII. Termination
Any party who has not theretofore breached any material provision of
this Agreement (including such party's obligations to use its best efforts to
satisfy conditions for the Closing) may terminate this Agreement by notice to
the other parties if all conditions to the Closing shall not have been satisfied
by the close of business on July 31, 1996. Such termination shall not limit any
other right or remedies which the terminating party may have against any other
party.
XIV. Indemnity.
A. Subject to the limitations on joint and several
26
<PAGE>
liability set forth in Section 16(d), JCI, THI and Haase, on the one
hand, and WJI and the Subsidiaries, on the other hand (respectively,
the "Indemnifying Party"), hereby jointly and severally agree to
indemnify the other (respectively, the "Indemnified Party") and hold
the Indemnified Party harmless against and in respect of the following:
1. any and all loss, liability or damage suffered or
incurred by any Indemnified Party by reason of any
untrue representation, breach of warranty or
non-fulfillment of any covenant by any Indemnifying
Party; and
2. any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses,
including, without limitation, legal fees and
expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in
enforcing this indemnity.
B. The responsibility of the Indemnifying Parties under this Section
shall expire on the 180th day after the date of this Agreement for all
matters as to which no written claim has been made theretofore.
XV. Release
Haase hereby generally releases and discharges JCI and THI and their
affiliates from any and all claims, obligations and agreements except for
Haase's rights under this Agreement and his rights for salary and other employee
benefits accruing in the ordinary course consistent with the representations and
warranties made by Haase, JCI and THI hereunder.
XVI. Miscellaneous
A. Successors, Assigns and Third Parties. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their
respective successors and assigns; provided, however, that, except as
otherwise expressly provided herein, none of the parties hereto may
make any assignment of this Agreement or any interest herein without
the prior written consent of the other parties hereto. Nothing herein
expressed or implied is intended or shall be construed to confer upon
or give to any person, firm or corporation, other than the parties
hereto and their respective successors and
27
<PAGE>
assigns, any rights or remedies under or by reason of this Agreement.
B. Governing Law. This Agreement shall in all respects be
interpreted, construed and governed by and in accordance with the
internal substantive laws of the State of New York, disregarding
principles of conflict of laws and the like.
C. Severability. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant
and/or provision hereof. In the event that any provision of this
Agreement shall finally be determined to be unlawful, such provision
shall be deemed severed from this Agreement, but every other provision
of this Agreement shall remain in full force and effect.
D. Notices. Except as otherwise expressly provided herein, any
notice, consent, or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been
given when received, and shall be addressed as follows:
If to WJI or Subsidiary, to it at:
c/o WJI at its New Jersey headquarters,
with a copy to:
Oscar D. Folger, Esq.
Law Offices of Oscar D. Folger
Fifth Avenue - 24th Floor
New York, New York 10175
If to JCI or to Haase, to him or it at JCI's New York headquarters,
with a copy to:
David Lieberman, Esq.
Blau, Kramer, Wactlar & Lieberman
100 Jericho Quadrangle
Suite 225
Jericho New York 11753
or at such other address or addresses as the party addressed may from time to
time designate in writing. Any communication dispatched by telegram or telex
shall be confirmed by letter.
28
<PAGE>
A. Expenses. All legal and other costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be
paid by the party incurring such expenses. Without limiting the
generality of the foregoing, any and all fees and expenses of any
attorneys of the Constituent Corporations incurred in connection with
this Agreement or the transactions contemplated hereby shall be borne
by the Constituent Corporation incurring such expense and shall not be
assumed by any other Constituent Corporation.
B. Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
C. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which shall constitute the same agreement. This Agreement may be
signed by facsimile.
D. Limitation on Joint and Several Liability. Haase and JCI shall be
jointly and severally liable for all agreements, indemnities,
representations and warranties made herein by either. Haase and THI
shall be jointly and severally liable for all agreements, indemnities,
representations and warranties made herein by either. Notwithstanding
anything to the contrary contained in this Agreement, neither THI nor
JCI shall have any liability for any representation or warranty made
herein by the other of them or by Haase regarding any matter which
relates to such other of them, or for any agreement or indemnity made
herein by the other of them or Haase.
IN WITNESS WHEREOF, the parties hereto have caused their signatures to
be affixed to this Agreement as of the date first above written.
WATER-JEL TECHNOLOGIES, INC.
By: /s/ Yitz Grossman
______________________________
Yitz Grossman, Chairman
JCI ACQUISITION CORPORATION
THI ACQUISITION CORPORATION
By: /s/ Yitz Grossman
______________________________
Yitz Grossman, Chairman
JOURNEYCRAFT, INC.
THERACOM, INC.
By: /s/ Werner Haase
______________________________
Werner Haase, Chairman
/s/ Werner Haase
_________________________________
Werner Haase
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") dated July 1, 1996
by and between WATER-JEL TECHNOLOGIES, INC. a New York
corporation with an office at 243 Veterans Boulevard, Carlstadt,
New Jersey 07072 (the "Company"), and NURIT KAHANE, residing at
655 Park Avenue, New York, New York 10021 (the "Executive").
1. Employment. The Company hereby employs the Executive as a
Senior Vice President of the Company for and during the term
hereof, subject to the supervision and control of the Company's
Board of Directors, and the terms and conditions hereof. The
Executive hereby accepts employment under the terms and
conditions set forth in this Agreement.
2. Duties of Executive. The Executive shall have such duties
as may be reasonably assigned to her from time to time by the
Board of Directors consistent with her status as a Senior Vice
President of the Company.
3. Business Time. The Executive agrees to devote such business
time as may be reasonably necessary to the performance of the
duties, responsibilities, and authorities which may be reasonably
assigned to her and which are consistent with her executive
status under Section 1.1 of this Agreement. It is understood that
such business time might not constitute Executive's full business
time and that Executive may conduct such other business
activities as are not in violation of Section 8 hereof.
4. Term. The term of this Agreement shall commence effective
July 1, 1996 and shall terminate on June 30, 2001.
5. Compensation. The Company shall pay the Executive, as
compensation for services rendered by the Executive as an officer
under this Agreement, as follows:
5.1 Base Salary. The Company shall pay the Executive a base
salary at the rate of $250,000 per annum subject to withholding
taxes, payable as per the Company's normal payroll practices as
in effect from time to time.
5.2 Options and Bonuses. The Company may also grant to
Executive from time to time such stock options, bonuses, and
other incentives as the Company's Board of Directors may
determine, in its sole discretion.
6. Termination. Notwithstanding any other provision in this
Agreement:
6.1 Death. If the Executive dies during the term of this
Agreement and while in the employ of the Company, this Agreement
shall automatically terminate as of the date of the Executive's
death; and the Company shall have no further obligation to the
Executive or her estate.
6.2 Disability. If, during the term of this Agreement, the
Executive is unable to
1
perform her duties hereunder as a result of any physical or mental
disability which continues for 180 days in any 365 day period, then
the Company, may terminate this Agreement upon written notice to
Executive.
6.3 Termination by the Company for Cause. At any time
during the term of this Agreement, the Company may discharge the
Executive for cause and terminate this Agreement without any
further liability hereunder to the Executive or her estate. For
purposes of this Agreement, a "discharge for cause" shall mean
termination of the Executive upon written notification to the
Executive limited, however, to one or more of the following
reasons:
6.3.1 Fraud, misappropriation or embezzlement by the
Executive in connection with the Company; or
6.3.2 Conviction by a court of competent jurisdiction
in the United States of a felony or a crime involving moral
turpitude; or
6.3.3 Willful and unauthorized disclosure of
confidential, or proprietary trade secret information of the
Company; or
6.3.4 The Executive's breach of any material term or
provision of this Agreement, after notice to the Executive of the
particular details thereof and a period of not less than (30)
days thereafter within which to cure such breach, if any.
7. Employment Benefits. While she is an employee of the
Company, the Executive shall be entitled to all employee benefits
made available to other executive officers of the Company.
Without limiting the foregoing, the Company will use reasonable
efforts to procure disability insurance with the Executive as
beneficiary which shall be sufficient to provide Executive with
her base compensation for any remainder of the term of this
Agreement that she is disabled as defined in Section 6.2.
8. Protective Covenants.
8.1 Because
(i) Executive will become fully familiar with all aspects of
the Company's business during the period of her employment with
the Company,
(ii) certain information of which the Executive will gain
knowledge during her employment is proprietary and confidential
information which is of special and peculiar value to the
Company,
(iii) if any such proprietary and confidential information
were imparted to or became known by any persons, including
Executive, engaging in a business in competition with that of the
Company, hardship, loss and irreparable injury and damage could
result to the Company, the measurement of which would be
difficult if not impossible to ascertain, and
2
<PAGE>
(iv) it is necessary for the Company to protect its business
from such damage,
the following covenants constitute a reasonable and appropriate
means, consistent with the best interests of both the Executive
and the Company, to protect the Company against such damage and
shall apply to and be binding upon Executive as provided herein.
8.2 Non-Competition by Executive. Executive covenants that,
while she is an employee of the Company and for 12 months
thereafter, neither she nor any of her affiliates will, directly
or indirectly (whether as an investor, shareholder, employee or
otherwise), engage in or participate in any business which is in
competition with the business of the Company.
8.3 Trade Secrets, Proprietary and Confidential Information.
8.3.1 Executive recognizes that her position with the
Company is one of the highest trust and confidence by reason of
Executive's access to and contact with trade secrets and
confidential and proprietary information of the Company.
8.3.2 Executive shall use her best efforts and exercise
utmost diligence to protect and safeguard and keep confidential
the trade secrets and confidential and proprietary information of
the Company.
8.3.3 Executive covenants that while she is an employee
of the Company and thereafter, she will not disclose disseminate
or distribute to another, nor induce any other person to
disclose, disseminate, or distribute, any trade secret or
proprietary or confidential information of the Company, directly
or indirectly, either for Executive's own benefit or for the
benefit of another, whether or not acquired, learned, obtained or
developed by Executive, or use or cause to be used, any trade
secret, proprietary or confidential information in any way except
as is required in the course of her employment with the Company.
8.3.4 All trade secrets and confidential and
proprietary information relating to the business of the Company
whether prepared by Executive or otherwise coming into her
possession, shall remain the exclusive property of the Company
and shall not, except in the furtherance of the business of the
Company, be removed from the premises of the Company under any
circumstances whatsoever without the prior written consent of the
Company.
8.3.5 Executive hereby assigns to the Company all her
right, title and interest in any and all inventions, discoveries,
improvements, ideas, computer or other apparatus programs and
related documentation, and other works of authorship (hereinafter
each designated "Intellectual Property") which she develops,
makes, creates or conceives in connection with her employment by
the Company.
8.3.6 Executive will, without charge to Company, but at
its expense, execute a specific assignment of title to the
Company to secure a patent, copyright or other form of protection
for said Intellectual Property anywhere in the world.
3
<PAGE>
8.4 Remedies. In the event of breach or threatened breach
by Executive of any provision of this Section, the Company shall
be entitled to apply for relief by temporary restraining order,
temporary injunction, or permanent injunction and to all other
relief to which it may be entitled, including any and all
monetary damages which the Company may incur as a result of said
breach, violation or threatened breach or violation. The Company
may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, and the
pursuit of one of such remedies at any time will not be deemed an
election of remedies or waiver of the right to pursue any other
of such remedies as to such breach, violation, or as to any other
breach, violation, or threatened breach or violation.
9. Change in Control.
(a) After a Change in Control of the Company as
defined under (b) hereafter, Executive shall be entitled to a
one-time additional compensation in an amount equal to the three
(3) times the Executive's then current annual compensation
(including bonuses). Such additional compensation will be paid
to Executive in a lump sum on or before the date such Change in
Control takes effect. Said amount shall be determined by counsel
to the Company in consultation with the Company's auditors.
(b) A "Change in Control" shall be deemed to have
occurred in the event (i) any person (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act"), or group of such "persons", without the
consent of the Board of Directors, is or becomes a "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act), directly
or indirectly, of securities of the Company representing 30% or
more of the combined voting power of the Company's then
outstanding securities, or (ii) of a merger, consolidation or
other combination the result of which is the ownership by
shareholders of the Company of less than 75% of those voting
securities of the resulting or acquiring entity having the power
to elect a majority of the Board of Directors of such entity; or
(iii) of the sale of transfer of in excess of 50% of the gross
assets of the Company as shown on the Company's then most recent
audited financial statements.
(c) Notwithstanding anything in the foregoing to the
contrary, no Change of Control shall be deemed to have occurred
for purposes of this Agreement by virtue of any transaction which
results in the Executive or a group of persons which includes the
Executive, acquiring, directly or indirectly, 30% or more of any
class of voting securities of the Company.
10. No Violation. Executive represents and warrants to the
Company that she is free to enter into this Agreement in
accordance with the terms hereof and is under no restriction,
contractual or otherwise, which would interfere with her
execution hereof or performance hereunder.
11. General Provisions.
11.1 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall
be deemed to have been delivered (i) on the date
4
<PAGE>
personally delivered or (ii) two days after the date deposited in a
receptacle maintained by the United States Postal Service for such
purpose, postage prepaid, by certified mail, return receipt requested,
addressed as set forth below or (iii) one day after properly sent by
Federal Express, addressed to the respective parties at their address
set forth above. Either party hereto may designate a different address
by providing written notice of such new address to the other party
hereto as provided above.
11.2 Severability. If any provision contained in this
Agreement is determined to be void, illegal or unenforceable, in
whole or in part, then the other provisions contained herein
shall remain in full force and effect as if the provision which
was determined to be void, illegal, or unenforceable had not been
contained herein.
11.3 Waiver, Modification and Integration. The waiver by
any party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent
breach of any party. This instrument and the documents referred
to herein contain the entire agreement of the parties concerning
employment and supersede any and all other agreements, either
oral or in writing, between the parties hereto with respect to
the employment of the Executive by the Company and contain all of
the covenants and agreements between the parties with respect to
such employment in any manner whatsoever. This Agreement may not
be modified, altered or amended except by written agreement of
all the parties hereto.
11.4 Binding Effect. This Agreement shall be binding and
effective upon the Company and its successors and permitted
assigns, and upon the Executive, her heirs and representatives.
11.5 Governing Law. This Agreement shall be governed by the
internal laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
WATER-JEL TECHNOLOGIES, INC.
_________/s/____________________ By: ___/s/Yitz Grossman____________
Nurit Kahane Title: Secretary
<PAGE>
A.S. GOLDMEN & COMPANY
INVESTMENT BANKING
45 BROADWAY ATRIUM
NEW YORK, NEW YORK 10006-3007
(212) 742-8500
(800) 678-4550
FAIRNESS OPINION
May 21, 1996
Board of Directors
Water-Jel Technologies, Inc.
243 Veterans Boulevard
Carlstadt, New Jersey 07072
Dear Members of the Board of Directors:
We understand that Water-Jel Technologies, Inc. ("WJT") and
Journeycraft, Inc. ("JCI") have entered into a merger agreement (the "Merger")
pursuant to which JCI will be merged with subsidiaries of WJT. In connection
with the Merger, WJT will issue 3,500,000 shares of its common stock in exchange
for all of the outstanding common stock of JCI. For the purposes of this letter,
"JCI" also includes Theracom, Inc.
You have requested our opinion of the Merger with respect to fairness,
from a financial point of view, to WJT and WJT's shareholders. A.S. Goldman &
Co., Inc. is customarily engaged in the evaluation of business and their
securities in connection with mergers & acquisitions, private placements,
shareholder transactions, estate and gift taxes, litigation, and for other
purposes.
In connection with rendering our opinion we have, among other things:
(1) Reviewed the Agreement and Plan of Merger between WJT and JCI;
(2) Analyzed financial information with respect to WJT, including
audited financial statements as of and for the three years ended August 31,
1995, August 31, 1994 and August 31, 1993 contained in the Form 10-K, unaudited
financial statements contained in the Forms 10-Q for the periods ended November
30, 1995 and February 28, 1996;
(3) Analyzed financial information with respect to JCI, including but
not limited to unaudited financial statements as of and for the three years
ended March 31,1996, March 31, 1995 and March 31, 1994, unaudited financial
statements as of and for the six months ended September 30, 1995 and the nine
months ended December 31, 1995, and management forecasts for the four years
ending March 31, 1999;
(4) Held discussions with certain members of WJT, JCI, senior
management concerning the past, current, and planned operations, financial
condition, and business prospects of each company;
(5) Discussed with the legal advisors of WJT the results of
their due diligence investigations of JCI;
(6) Reviewed the historical market prices of WJT common stock;
(7) Reviewed the compostion of ownership of WJT and JCI common
stock;
(8) Reviewed the financial terms of the Merger;
(9) Considered financial data of WJT and JCI, and have compared that
data with similar data for other publicly held companies similar to WJT and JCI;
(10) Considered the financial terms of certain other business
combinations and other transactions that have recently been effectuated; and
(11) Considered such other information, financial studies, and analyses
as we deemed relevant, and performed such analyses, studies, and investigations
as we deemed appropriate.
A.S. Goldmen & Co., Inc. has assumed and relied upon, without
independent verification, the accurancy and completeness of the information
reviewed by us. With respect to any projections, we assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performance of JCI. We have also assumed
with our independent verification that JCI owns and has adequate legal
protection for all material tangible assets and intellectual property that it
purports to own, and that key agreement to which JCI purports to be a party are
valid and enforceable. We have also assumed that the Merger will be nontaxable
transaction. Accordingly, we do not make any warranties nor do we make any
representations with respect to the aforementioned items.
We have not performed an appraisal of the assets, liabilities, or
intellectual property of JCI, nor have we been furnished with any such
valuations or appraisals. We have assumed that the assessments of management
have been made in good faith and reflect the best currently available management
judgments as to matters covered. Our opinion is necessarily based upon economic,
market, and other conditions as in effect on, and the information made available
to us as of, the date of this letter. Our opinion is limited to the fairness of
the Merger as of the date hereof, from a financial point of view. We make no
representations with respect to the business decision to effect the Merger or
any other terms of the Merger. This opinion does not represent our opinion as to
what the value of JCI or WJT may be as of the date of this letter.
We understand that in considering the Merger, the Board of Directors of
WJT has considered a wide range of financial and nonfinancial factors, many of
which are beyond the scope of this letter. This letter is not intended to
substitute for the Board's exercise of its own business judgment in reviewing
the Merger.
<PAGE>
Based upon and subject to the foregoing considerations, it is our
opinion as financial advisors to WJT that the Merger is fair from a financial
point of view to WJT and to WJT's shareholders.
The foregoing opinion is to be used for the information and assistance
of WJT. Accordingly, it is understood and agree that no person other than WJT
and its officers, directors and shareholders shall be allowed to use or rely
upon this opinion.
Very truly yours.
/s/ Stuart Winkler
A.S. GOLDMEN & CO., INC.
Stuart Winkler
Managing Director
